Florida Senate - 2012 SB 1756 By Senator Negron 28-00835B-12 20121756__ 1 A bill to be entitled 2 An act relating to life insurance; requiring certain 3 life insurance policies or life insurance policy 4 riders to provide for accelerated payment of death 5 benefits to insureds who have been residents of a 6 nursing home for a specified amount of time and who 7 are expected to remain residents of a nursing home 8 until their death; requiring insurers providing life 9 insurance to offer applicants for life insurance 10 certain policies or riders providing for accelerated 11 death benefit payments; requiring that insurers offer 12 by a specified date riders providing certain 13 accelerated death benefit payments to every insured 14 holding a life insurance policy in effect before the 15 effective date of this act; requiring that an insured 16 who holds a life insurance policy and who applies for 17 Medicaid benefits in order to pay for long-term care 18 determine the fair market value of the policy and 19 spend down all proceeds from converting the policy to 20 pay for long-term care in a specified manner; 21 requiring a long-term care benefit plan to ensure that 22 certain payments are to be made to an insured’s estate 23 and guarantee payment of a specified funeral expense 24 benefit to an insured’s estate; providing an 25 exception; requiring insurers to provide written 26 notifications under certain circumstances containing 27 specified information and statements to life insurance 28 policy owners who are of a certain age or terminally 29 or chronically ill; providing penalties and remedies 30 under part II of ch. 501, F.S., relating to deceptive 31 and unfair trade practices, for an insurer’s failure 32 to comply with such notice requirements; requiring the 33 Office of Insurance Regulation to adopt rules; 34 providing an effective date. 35 36 Be It Enacted by the Legislature of the State of Florida: 37 38 Section 1. Life insurance accelerated benefit policy or 39 rider.— 40 (1) Any insured who holds a life insurance policy or life 41 insurance policy rider that provides accelerated payments of a 42 death benefit upon diagnosis of a terminal illness defined as a 43 life expectancy of 12 months or less is entitled to an 44 accelerated payment of a death benefit if it is shown that the 45 insured has been a resident of a nursing home for at least 3 46 months and is expected to remain a resident of a nursing home 47 until his or her death. The amount of the benefit to which the 48 insured is entitled must be determined in an actuarially 49 appropriate manner by considering the length the policy has been 50 in effect, the amount that has been paid on the policy, the cash 51 value of the policy, and the amount of the death benefit. 52 (2) Every insurer providing life insurance in this state 53 must offer an applicant for life insurance a policy or rider 54 entitling the insured to accelerated payment of a death benefit 55 upon diagnosis of a terminal illness or upon a showing that the 56 insured has been a resident of a nursing home and is expected to 57 remain a resident of a nursing home until his or her death, as 58 provided under subsection (1). 59 (3) On or before July 1, 2013, every insurer must offer a 60 rider that provides the accelerated payment of a death benefit 61 as provided under subsection (1) to every insured holding a life 62 insurance policy in effect before the effective date of this 63 act. 64 (4) Any insured who holds a life insurance policy must 65 determine the fair market value of the policy, as provided under 66 this section, if he or she applies for Medicaid benefits to pay 67 for long-term care, and must first spend down all proceeds from 68 converting the policy to which he or she is entitled, 69 exclusively in payment for long-term care services under the 70 direction of an irrevocable long-term care benefit account 71 administered by a qualified third party. After completion of the 72 spend down of the long-term care benefit through use of an 73 irrevocable long-term care benefit account, the Medicaid 74 applicant may be considered for Medicaid eligibility. 75 (5) A long-term care benefit plan must: 76 (a) Ensure that if the insured dies before the long-term 77 care benefit account has been spent down, any remaining unused 78 balance of monthly benefit payments is to be paid to the estate 79 of the insured; and 80 (b) Guarantee that upon proof of the insured’s death, a 81 final funeral expense benefit of $5,000 or 5 percent of the 82 policy’s face value, whichever is less, is to be paid to the 83 estate of the insured. 84 85 A qualified funeral expense policy is exempt from the 86 requirements of this subsection. 87 Section 2. Lapse or surrender of life insurance policy; 88 notice to policy owners age 65 or older or terminally or 89 chronically ill.— 90 (1) An insurer must provide the written notice required by 91 subsection (2) to a life insurance policy owner if an insured is 92 age 65 or older, or known by the insurer to be terminally or 93 chronically ill, and if: 94 (a) The policy owner requests the surrender, in whole or in 95 part, of a policy; 96 (b) The policy owner requests an accelerated death benefit 97 under a policy; 98 (c) The insurer sends notice to the policy owner that the 99 policy may lapse; however, an insurer does not have to provide 100 the notice required under this subsection to a policy owner more 101 than once within a 12-month period after the date of the first 102 notice that the policy may lapse; or 103 (d) At any other time that the Commissioner of Insurance 104 Regulation may prescribe by rule. 105 106 The failure of an insurer to comply with the requirements of 107 this subsection is a deceptive and unfair trade practice as 108 defined in part II of chapter 501, Florida Statutes, and is 109 subject to the penalties and remedies provided therein. 110 (2) The Office of Insurance Regulation, under the direction 111 of the Commissioner of Insurance Regulation, must adopt rules 112 that provide for a written notice that apprises a policy owner 113 in lay terms of the alternatives available to prevent the lapse 114 or surrender of a policy and a policy owner’s rights relating to 115 the disposition of a policy. The Office of Insurance Regulation 116 shall bear any and all costs associated with the development and 117 adoption of rules under this subsection. 118 (3) The written notice must contain the following: 119 (a) A statement explaining that life insurance is a 120 critical part of a broader financial plan; 121 (b) A statement explaining that there are alternatives to 122 the lapse or surrender of a policy; 123 (c) A general description of the following alternatives to 124 the lapse or surrender of a policy: 125 1. Accelerated death benefits available under the policy or 126 as a rider to the policy; 127 2. The sale of the policy pursuant to a life settlement 128 contract, including that a life settlement is a regulated 129 transaction in this state; 130 3. The replacement of the policy pursuant to statute, rule, 131 or the terms of the policy; 132 4. The maintenance of the policy pursuant to the terms of 133 the policy, pursuant to a rider to the policy, or through a life 134 settlement contract; 135 5. The maintenance of the policy through the use of loans 136 issued by an insurer or a third party, using the cash surrender 137 value of the policy as collateral to obtain the loans; 138 6. Conversion of the policy from a term policy to a 139 permanent policy; and 140 7. Conversion of the policy in order to obtain long-term 141 care health insurance coverage or a long-term care benefit plan; 142 and 143 (d) A statement explaining that life insurance, life 144 settlements, or other alternatives to the lapse or surrender of 145 the policy described in the notice may or may not be available 146 to a particular policy owner depending on a number of 147 circumstances, including, but not limited to, the age and health 148 status of the insured or the terms of a life insurance policy, 149 and that a policy owner should contact his or her financial 150 advisor, insurance agent, broker, or attorney to obtain further 151 advice and assistance. 152 Section 3. This act shall take effect July 1, 2012.