Current through August, 2024
Section 1
Purpose and Scope
A. The purpose of this
regulation is:
(1) To regulate the activities
of insurers and producers with respect to the replacement of existing life
insurance and annuities.
(2) To
protect the interests of life insurance and annuity purchasers by establishing
minimum standards of conduct to be observed in replacement or financed purchase
transactions. It will:
(a) Assure that
purchasers receive information with which a decision can be made in his or her
own best interest; and
(b) Reduce
the opportunity for misrepresentation and incomplete disclosure.
B. Unless otherwise
specifically included, this regulation shall not apply to transactions
involving:
(1) Credit life
insurance;
(2) Group life insurance
or group annuities where there is no direct solicitation of individuals by an
insurance producer. Direct solicitation shall not include any group meeting
held by an insurance producer solely for the purpose of educating or enrolling
individuals or, when initiated by an individual member of the group, assisting
with the selection of investment options offered by a single insurer in
connection with enrolling that individual. Group life insurance or group
annuity certificates marketed through direct response solicitation shall be
subject to the provisions of Section 7;
(3) Group life insurance and annuities used
to fund prearranged funeral contracts;
(4) An application to the existing insurer
that issued the existing policy or contract when a contractual change or a
conversion privilege is being exercised; or, when the existing policy or
contract is being replaced by the same insurer pursuant to a program filed with
and approved by the commissioner;
(5) Proposed life insurance that is to
replace life insurance under a binding or conditional receipt issued by the
same company;
(6)
(a) Policies or contracts used to fund (i) an
employee pension or welfare benefit plan that is covered by the Employee
Retirement and Income Security Act (ERISA); (ii) a plan described by Sections
401(a), 401(k) or 403(b) of the Internal Revenue Code, where the plan, for
purposes of ERISA, is established or maintained by an employer; (iii) a
governmental or church plan defined in Section
414, a
governmental or church welfare benefit plan, or a deferred compensation plan of
a state or local government or tax exempt organization under Section 457 of the
Internal Revenue Code; or (iv) a nonqualified deferred compensation arrangement
established or maintained by an employer or plan sponsor.
(b) Notwithstanding Subparagraph (a), this
regulation shall apply to policies or contracts used to fund any plan or
arrangement that is funded solely by contributions an employee elects to make,
whether on a pre-tax or after-tax basis, and where the insurer has been
notified that plan participants may choose from among two (2) or more insurers
and there is a direct solicitation of an individual employee by an insurance
producer for the purchase of a contract or policy. As used in this subsection,
direct solicitation shall not include any group meeting held by an insurance
producer solely for the purpose of educating individuals about the plan or
arrangement or enrolling individuals in the plan or arrangement or, when
initiated by an individual employee, assisting with the selection of investment
options offered by a single insurer in connection with enrolling that
individual employee;
(7)
Where new coverage is provided under a life insurance policy or contract and
the cost is borne wholly by the insured's employer or by an association of
which the insured is a member;
(8)
Existing life insurance that is a non-convertible term life insurance policy
that will expire in five (5) years or less and cannot be renewed;
(9) Immediate annuities that are purchased
with proceeds from an existing contract. Immediate annuities purchased with
proceeds from an existing policy are not exempted from the requirements of this
regulation; or
(10) Structured
settlements.
C.
Registered contracts shall be exempt from the requirements of Sections 5A(2)
and 6B with respect to the provision of illustrations or policy summaries;
however, premium or contract contribution amounts and identification of the
appropriate prospectus or offering circular shall be required
instead.
Section 2
Definitions
A. "Direct-response solicitation"
means a solicitation through a sponsoring or endorsing entity or individually
solely through mails, telephone, the Internet or other mass communication
media.
B. "Existing insurer" means
the insurance company whose policy or contract is or will be changed or
affected in a manner described within the definition of
"replacement."
C. "Existing policy
or contract" means an individual life insurance policy (policy) or annuity
contract (contract) in force, including a policy under a binding or conditional
receipt or a policy or contract that is within an unconditional refund
period.
D. "Financed purchase"
means the purchase of a new policy involving the actual or intended use of
funds obtained by the withdrawal or surrender of, or by borrowing from values
of an existing policy to pay all or part of any premium due on the new policy.
For purposes of a regulatory review of an individual transaction only, if a
withdrawal, surrender or borrowing involving the policy values of an existing
policy is used to pay premiums on a new policy owned by the same policyholder
and issued by the same company within four (4) months before or thirteen (13)
months after the effective date of the new policy, it will be deemed prima
facie evidence of the policyholder's intent to finance the purchase of the new
policy with existing policy values. This prima facie standard is not intended
to increase or decrease the monitoring obligations contained in Section 4A(5)
of this regulation.
E.
"Illustration" means a presentation or depiction that includes non-guaranteed
elements of a policy of life insurance over a period of years as defined in
Regulation 98-1 of the Vermont Department of Banking, Insurance, Securities and
Health Care Administration.
F.
"Policy summary," for the purposes of this regulation;
(1) For policies or contracts other than
universal life policies, means a written statement regarding a policy or
contract which shall contain to the extent applicable, but need not be limited
to, the following information: current death benefit; annual contract premium;
current cash surrender value; current dividend; application of current
dividend; and amount of outstanding loan.
(2) For universal life policies, means a
written statement that shall contain at least the following information: the
beginning and end date of the current report period; the policy value at the
end of the previous report period and at the end of the current report period;
the total amounts that have been credited or debited to the policy value during
the current report period, identifying each by type (e.g., interest, mortality,
expense and riders); the current death benefit at the end of the current report
period on each life covered by the policy; the net cash surrender value of the
policy as of the end of the current report period; and the amount of
outstanding loans, if any, as of the end of the current report
period.
G. "Producer,"
for the purpose of this regulation, shall be defined to include agents, brokers
and producers.
H. "Replacing
insurer" means the insurance company that issues or proposes to issue a new
policy or contract that replaces an existing policy or contract or is a
financed purchase.
I. "Registered
contract" means a variable annuity contract or variable life insurance policy
subject to the prospectus delivery requirements of the Securities Act of
1933.
J. "Replacement" means a
transaction in which a new policy or contract is to be purchased, and it is
known or should be known to the proposing producer, or to the proposing insurer
if there is no producer, that by reason of the transaction, an existing policy
or contract has been or is to be:
(1) Lapsed,
forfeited, surrendered or partially surrendered, assigned to the replacing
insurer or otherwise terminated;
(2) Converted to reduced paid-up insurance,
continued as extended term insurance, or otherwise reduced in value by the use
of nonforfeiture benefits or other policy values;
(3) Amended so as to effect either a
reduction in benefits or in the term for which coverage would otherwise remain
in force or for which benefits would be paid;
(4) Reissued with any reduction in cash
value; or
(5) Used in a financed
purchase.
K. "Sales
material" means a sales illustration and any other written, printed or
electronically presented information created, or completed or provided by the
company or producer and used in the presentation to the policy or contract
owner related to the policy or contract purchased.
Section 3 Duties of Producers
A. A producer who initiates an application
shall submit to the insurer, with or as part of the application, a statement
signed by both the applicant and the producer as to whether the applicant has
existing policies or contracts. If the answer is "no," the producer's duties
with respect to replacement are complete.
B. If the applicant answered "yes" to the
question regarding existing coverage referred to in Subsection A, the producer
shall present and read to the applicant, not later than at the time of taking
the application, a notice regarding replacements in the form as described in
Appendix A or other substantial similar form approved by the commissioner.
However, no approval shall be required when amendments to the notice are
limited to the omission of references not applicable to the product being sold
or replaced. The notice shall be signed by both the applicant and the producer
attesting that the notice has been read aloud by the producer or that the
applicant did not wish the notice to be read aloud (in which case the producer
need not have read the notice aloud) and left with the applicant.
C. The notice shall list all life insurance
policies or annuities proposed to be replaced, properly identified by name of
insurer, the insured or annuitant, and policy or contract number if available;
and shall include a statement as to whether each policy or contract will be
replaced or whether a policy will be used as a source of financing for the new
policy or contract. If a policy or contract number has not been issued by the
existing insurer, alternative identification, such as an application or receipt
number, shall be listed.
D. In
connection with a replacement transaction the producer shall leave with the
applicant at the time an application for a new policy or contract is completed
the original or a copy of all sales material. With respect to electronically
presented sales material, it shall be provided to the policy or contract owner
in printed form no later than at the time of policy or contract
delivery.
E. Except as provided in
Section 5C, in connection with a replacement transaction the producer shall
submit to the insurer to which an application for a policy or contract is
presented, a copy of each document required by this section, a statement
identifying any preprinted or electronically presented company approved sales
materials used, and copies of any individualized sales materials, including any
illustrations related to the specific policy or contract purchased.
Section 4 Duties of Insurers that
Use Producers
Each insurer shall:
A. Maintain a system of supervision and
control to insure compliance with the requirements of this regulation that
shall include at least the following:
(1)
Inform its producers of the requirements of this regulation and incorporate the
requirements of this regulation into all relevant producer training manuals
prepared by the insurer;
(2)
Provide to each producer a written statement of the company's position with
respect to the acceptability of replacements providing guidance to its producer
as to the appropriateness of these transactions;
(3) A system to review the appropriateness of
each replacement transaction that the producer does not indicate is in accord
with Paragraph (2) above;
(4)
Procedures to confirm that the requirements of this regulation have been met;
and
(5) Procedures to detect
transactions that are replacements of existing policies or contracts by the
existing insurer, but that have not been reported as such by the applicant or
producer. Compliance with this regulation may include, but shall not be limited
to, systematic customer surveys, interviews, confirmation letters, or programs
of internal monitoring;
B. Have the capacity to monitor each
producer's life insurance policy and annuity contract replacements for that
insurer, and shall produce, upon request, and make such records available to
the Department of Banking, Insurance, Securities and Health Care
Administration. The capacity to monitor shall include the ability to produce
records for each producer's:
(1) Life
replacements, including financed purchases, as a percentage of the producer's
total annual sales for life insurance;
(2) Number of lapses of policies by the
producer as a percentage of the producer's total annual sales for life
insurance;
(3) Annuity contract
replacements as a percentage of the producer's total annual annuity contract
sales;
(4) Number of transactions
that are unreported replacements of existing policies or contracts by the
existing insurer detected by the company's monitoring system as required by
Subsection A(5) of this section; and
(5) Replacements, indexed by replacing
producer and existing insurer;
C. Require with or as a part of each
application for life insurance or an annuity a signed statement by both the
applicant and the producer as to whether the applicant has existing policies or
contracts;
D. Require with each
application for life insurance or an annuity that indicates an existing policy
or contract a completed notice regarding replacements as contained in Appendix
A;
E. When the applicant has
existing policies or contracts, each insurer shall be able to produce copies of
any sales material required by Section 3E, the basic illustration and any
supplemental illustrations related to the specific policy or contract that is
purchased, and the producer's and applicant's signed statements with respect to
financing and replacement for at least five (5) years after the termination or
expiration of the proposed policy or contract;
F. Ascertain that the sales material and
illustrations required by Section 3E of this regulation meet the requirements
of this regulation and are complete and accurate for the proposed policy or
contract;
G. If an application does
not meet the requirements of this regulation, notify the producer and applicant
and fulfill the outstanding requirements; and
H. Maintains records in accordance with
Regulation 99-1, Record Retention, of the Vermont Department of Banking,
Insurance, Securities and Health Care Administration.
Section 5 Duties of Replacing Insurers that
Use Producers
A. Where a replacement is
involved in the transaction, the replacing insurer shall:
(1) Verify that the required forms are
received and are in compliance with this regulation;
(2) Notify any other existing insurer that
may be affected by the proposed replacement within five (5) business days of
receipt of a completed application indicating replacement or when the
replacement is identified if not indicated on the application, and mail a copy
of the available illustration or policy summary for the proposed policy or
available disclosure document for the proposed contract within five (5)
business days of a request from an existing insurer;
(3) Be able to produce copies of the
notification regarding replacement required in Section 3B, indexed by producer,
for at least five (5) years or until the next regular examination by the
insurance department of a company's state of domicile, whichever is later;
and
(4) Provide to the policy or
contract owner notice of the right to return the policy or contract within
thirty (30) days of the delivery of the contract and receive an unconditional
full refund of all premiums or considerations paid on it, including any policy
fees or charges -or, in the case of a variable or market value adjustment
policy or contract, a payment of the cash surrender value provided under the
policy or contract plus the fees and other charges deducted from the gross
premiums or considerations or imposed under such policy or contract; such
notice may be included in Appendix A or C.
B. In transactions where the replacing
insurer and the existing insurer are the same or subsidiaries or affiliates
under common ownership or control allow credit for the period of time that has
elapsed under the replaced policy's or contract's incontestability and suicide
period up to the face amount of the existing policy or contract. With regard to
financed purchases the credit may be limited to the amount the face amount of
the existing policy is reduced by the use of existing policy values to fund the
new policy or contract.
C. If an
insurer prohibits the use of sales material other than that approved by the
company, as an alternative to the requirements made of an insurer pursuant to
Section 3E, the insurer shall:
(1) Require
with each application a statement signed by the producer that:
(a) Represents that the producer used only
company-approved sales material; and
(b) States that copies of all sales material
were left with the applicant in accordance with Section 3D; and
(2) Within ten (10) days of the
issuance of the policy or contract:
(a)
Notify the applicant by sending a letter or by verbal communication with the
applicant by a person whose duties are separate from the marketing area of the
insurer, that the producer has represented that copies of all sales material
have been left with the applicant in accordance with Section 3D;
(b) Provide the applicant with a toll free
number to contact company personnel involved in the compliance function if such
is not the case; and
(c) Stress the
importance of retaining copies of the sales material for future reference;
and
(3) Be able to
produce a copy of the letter or other verification in the policy file for at
least five (5) years after the termination or expiration of the policy or
contract.
Section
6 Duties of the Existing Insurer
Where a replacement is involved in the transaction, the
existing insurer shall:
A. Retain and
be able to produce all replacement notifications received, indexed by replacing
insurer, for at least five (5) years or until the conclusion of the next
regular examination conducted by the Insurance Department of its state of
domicile, whichever is later.
B.
Send a letter to the policy or contract owner of the right to receive
information regarding the existing policy or contract values including, if
available, an in force illustration or policy summary if an in force
illustration cannot be produced within five (5) business days of receipt of a
notice that an existing policy or contract is being replaced. The information
shall be provided within five (5) business days of receipt of the request from
the policy or contract owner.
C.
Upon receipt of a request to borrow, surrender or withdraw any policy values,
send a notice, advising the policy owner that the release of policy values may
affect the guaranteed elements, non-guaranteed elements, face amount or
surrender value of the policy from which the values are released. The notice
shall be sent separate from the check if the check is sent to anyone other than
the policy owner. In the case of consecutive automatic premium loans, the
insurer is only required to send the notice at the time of the first
loan.
Section 7 Duties of
Insurers with Respect to Direct Response Solicitations
A. In the case of an application that is
initiated as a result of a direct response solicitation, the insurer shall
require, with or as part of each completed application for a policy or
contract, a statement asking whether the applicant, by applying for the
proposed policy or contract, intends to replace, discontinue or change an
existing policy or contract. If the applicant indicates a replacement or change
is not intended or if the applicant fails to respond to the statement, the
insurer shall send the applicant, with the policy or contract, a notice
regarding replacement in Appendix B, or other substantially similar form
approved by the commissioner.
B. If
the insurer has proposed the replacement or if the applicant indicates a
replacement is intended and the insurer continues with the replacement, the
insurer shall:
(1) Provide to applicants or
prospective applicants with the policy or contract a notice, as described in
Appendix C, or other substantially similar form approved by the commissioner.
In these instances the insurer may delete the references to the producer,
including the producer's signature, and references not applicable to the
product being sold or replaced, without having to obtain approval of the form
from the commissioner. The insurer's obligation to obtain the applicant's
signature shall be satisfied if it can demonstrate that it has made a diligent
effort to secure a signed copy of the notice referred to in this paragraph. The
requirement to make a diligent effort shall be deemed satisfied if the insurer
includes in the mailing a self-addressed postage prepaid envelope with
instructions for the return of the signed notice referred to in this section;
and
(2) Comply with the
requirements of Section 5A(2), if the applicant furnishes the names of the
existing insurers, and the requirements of Sections 5A(3), 5A(4) and
5B.
Section 8
Violations and Penalties
A. Any failure to
comply with this regulation shall be considered a violation of Chapter 129 of
Title 8, V.S.A., Insurance Trade Practices Act. Examples of violations include:
(1) Any deceptive or misleading information
set forth in sales material;
(2)
Failing to ask the applicant in completing the application the pertinent
questions regarding the possibility of financing or replacement;
(3) The intentional incorrect recording of an
answer;
(4) Advising an applicant
to respond negatively to any question regarding replacement in order to prevent
notice to the existing insurer; or
(5) Advising a policy or contract owner to
write directly to the company in such a way as to attempt to obscure the
identity of the replacing producer or company.
B. Policy and contract owners have the right
to replace existing life insurance policies or annuity contracts after
indicating in or as a part of applications for new coverage that replacement is
not their intention; however, patterns of such action by policy or contract
owners of the same producer shall be deemed prima facie evidence of the
producer's knowledge that replacement was intended in connection with the
identified transactions, and these patterns of action shall be deemed prima
facie evidence of the producer's intent to violate this regulation.
C. Where it is determined that the
requirements of this regulation have not been met the replacing insurer shall
provide to the policy owner an in force illustration if available or policy
summary for the replacement policy or available disclosure document for the
replacement contract and the appropriate notice regarding replacements in
Appendix A or C.
D. Violations of
this regulation shall subject the violators to penalties under Vermont law that
may include the revocation or suspension of a producer's or company's license
and monetary fines.
Section
9 Severability
If any section or portion of a section of this regulation, or
its applicability to any person or circumstances, is held invalid by a court,
the remainder of this regulation, or the applicability of its provisions to
other persons, shall not be affected.
Section 10 Effective Date
This regulation shall be effective March 1, 2002.
Appendix A IMPORTANT NOTICE
REPLACEMENT OF LIFE INSURANCE OR ANNUITIES
This document must be signed by the applicant and the
producer, if there is one, and a copy left with the applicant.
You are contemplating the purchase of a life insurance policy
or annuity contract. In some cases this purchase may involve discontinuing or
changing an existing policy or contract. If so, a replacement is occurring.
Financed purchases are also considered replacements.
A replacement occurs when a new policy or contract is
purchased and, in connection with the sale, you discontinue making premium
payments on the existing policy or contract, or an existing policy or contract
is surrendered, forfeited, assigned to the replacing insurer, or otherwise
terminated or used in a financed purchase.
A financed purchase occurs when the purchase of a new life
insurance policy involves the use of funds obtained by the withdrawal or
surrender of or by borrowing some or all of the policy values, including
accumulated dividends, of an existing policy to pay all or part of any premium
or payment due on the new policy. A financed purchase is a replacement.
You should carefully consider whether a replacement is in
your best interests. You will pay acquisition costs and there may be surrender
costs deducted from your policy or contract. You may be able to make changes to
your existing policy or contract to meet your insurance needs at less cost. A
financed purchase will reduce the value of your existing policy and may reduce
the amount paid upon the death of the insured.
We want you to understand the effects of replacements before
you make your purchase decision and ask that you answer the following questions
and consider the questions on the back of this form.
1. Are you considering discontinuing making
premium payments, surrendering, forfeiting, assigning to the insurer, or
otherwise terminating your existing policy or contract? ___ YES ___
NO
2. Are you considering using
funds from your existing policies or contracts to pay premiums due on the new
policy or contract? ___ YES ___ NO
If you answered "yes" to either of the above questions, list
each existing policy or contract you are contemplating replacing (include the
name of the insurer, the insured or annuitant, and the policy or contract
number if available) and whether each policy or contract will be replaced or
used as a source of financing:
|
INSURER NAME |
CONTRACT OR POLICY # |
INSURED ANNUITANT |
OR REPLACED (R) OR FINANCING
(F) |
|
1. |
|
2. |
|
3. |
Make sure you know the facts. Contact your existing company
or its agent for information about the old policy or contract. If you request
one, an in force illustration, policy summary or available disclosure documents
must be sent to you by the existing insurer. Ask for and retain all sales
material used by the agent in the sales presentation. Be sure that you are
making an informed decision.
The existing policy or contract is being replaced
because
___
I certify that the responses herein are, to the best of my
knowledge, accurate:
___
Applicant's Signature and Printed Name Date
___
Producer's Signature and Printed Name Date
I do not want this notice read aloud to me. (Applicants must
initial only if they do not want the notice read aloud.)
A replacement may not be in your best interest, or your
decision could be a good one. You should make a careful comparison of the costs
and benefits of your existing policy or contract and the proposed policy or
contract. One way to do this is to ask the company or agent that sold you your
existing policy or contract to provide you with information concerning your
existing policy or contract. This may include an illustration of how your
existing policy or contract is working now and how it would perform in the
future based on certain assumptions. Illustrations should not, however, be used
as a sole basis to compare policies or contracts. You should discuss the
following with your agent to determine whether replacement or financing your
purchase makes sense:
|
PREMIUMS: |
Are they affordable? |
|
Could they change? |
|
You're older - are premiums higher for the proposed
new |
|
policy? |
|
How long will you have to pay premiums on the new
policy? On |
|
the old policy? |
|
POLICY VALUES: |
New policies usually take longer to build cash values
and to |
|
pay dividends. |
|
Acquisition costs for the old policy may have been
paid, you |
|
will incur costs for the new one. |
|
What surrender charges do the policies
have? |
|
What expense and sales charges will you pay on the
new policy? |
|
Does the new policy provide more insurance
coverage? |
|
INSURABILITY: |
If your health has changed since you bought your old
policy, |
|
the new one could cost you more, or you could be
turned down. |
|
You may need a medical exam for a new
policy. |
|
Claims on most new policies for up to the first two
years can |
|
be denied based on inaccurate statements. |
|
Suicide limitations may begin anew on the new
coverage. |
|
IF YOU ARE KEEPING THE OLD POLICY AS WELL AS THE NEW
POLICY: |
|
How are premiums for both policies being
paid? |
|
How will the premiums on your existing policy be
affected? |
|
Will a loan be deducted from death
benefits? |
|
What values from the old policy are being used to
pay |
|
premiums? |
|
IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST
SENSITIVE LIFE PRODUCT: |
|
Will you pay surrender charges on your old
contract? |
|
What are the interest rate guarantees for the new
contract? |
|
Have you compared the contract charges or other
policy |
|
expenses? |
|
OTHER ISSUES TO CONSIDER FOR ALL
TRANSACTIONS: |
|
What are the tax consequences of buying the new
policy? |
|
Is this a tax free exchange? (See your tax
advisor.) |
|
Is there a benefit from favorable "grandfathered"
treatment of |
|
the old policy under the federal tax
code? |
|
Will the existing insurer be willing to modify the
old policy? |
|
How does the quality and financial stability of the
new |
|
company compare with your existing
company? |
Appendix B NOTICE REGARDING REPLACEMENT
REPLACING YOUR LIFE INSURANCE POLICY OR ANNUITY?
Are you thinking about buying a new life insurance policy or
annuity and discontinuing or changing an existing one? If you are, your
decision could be a good one - or a mistake. You will not know for sure unless
you make a careful comparison of your existing benefits and the proposed policy
or contract's benefits.
Make sure you understand the facts. You should ask the
company or agent that sold you your existing policy or contract to give you
information about it.
Hear both sides before you decide. This way you can be sure
you are making a decision that is in your best interest.
$ ?
Appendix C IMPORTANT NOTICE
REPLACEMENT OF LIFE INSURANCE OR ANNUITIES
You are contemplating the purchase of a life insurance policy
or annuity contract. In some cases this purchase may involve discontinuing or
changing an existing policy or contract. If so, a replacement is occurring.
Financed purchases are also considered replacements.
A replacement occurs when a new policy or contract is
purchased and, in connection with the sale, you discontinue making premium
payments on the existing policy or contract, or an existing policy or contract
is surrendered, forfeited, assigned to the replacing insurer, or otherwise
terminated or used in a financed purchase.
A financed purchase occurs when the purchase of a new life
insurance policy involves the use of funds obtained by the withdrawal or
surrender of or by borrowing some or all of the policy values, including
accumulated dividends, of an existing policy, to pay all or part of any premium
or payment due on the new policy. A financed purchase is a replacement.
You should carefully consider whether a replacement is in
your best interests. You will pay acquisition costs and there may be surrender
costs deducted from your policy or contract. You maybe able to make changes to
your existing policy or contract to meet your insurance needs at less cost. A
financed purchase will reduce the value of your existing policy and may reduce
the amount paid upon the death of the insured.
We want you to understand the effects of replacements and ask
that you answer the following questions and consider the questions on the back
of this form.
1. Are you
considering discontinuing making premium payments, surrendering, forfeiting,
assigning to the insurer, or otherwise terminating your existing policy or
contract? ___ YES ___ NO
2. Are you
considering using funds from your existing policies or contracts to pay
premiums due on the new policy or contract? ___ YES ___ NO
Please list each existing policy or contract you are
contemplating replacing (include the name of the insurer, the insured, and the
policy or contract number if available) and whether each policy or contract
will be replaced or used as a source of financing:
|
INSURER NAME |
CONTRACT OR POLICY # |
INSURED OR ANNUITANT |
REPLACED (R) OR FINANCING
(F) |
|
1. |
|
2. |
|
3. |
Make sure you know the facts. Contact your existing company
or its agent for information about the old policy or contract. If you request
one, an in force illustration, policy summary or available disclosure documents
must be sent to you by the existing insurer. Ask for and retain all sales
material used by the agent in the sales presentation. Be sure that you are
making an informed decision.
I certify that the responses herein are, to the best of my
knowledge, accurate:
___
Applicant's Signature and Printed Name Date
A replacement may not be in your best interest, or your
decision could be a good one. You should make a careful comparison of the costs
and benefits of your existing policy or contract and the proposed policy or
contract- One way to do this is to ask the company or agent that sold you your
existing policy or contract to provide you with information concerning your
existing policy or contract. This may include an illustration of how your
existing policy or contract is working now and how it would perform in the
future based on certain assumptions. Illustrations should not, however, be used
as a sole basis to compare policies or contracts. You should discuss the
following with your agent to determine whether replacement or financing your
purchase makes sense:
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PREMIUMS: |
Are they affordable? |
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Could they change? |
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You're older- are premiums higher for the proposed
new policy? |
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How long will you have to pay premiums on the new
policy? On |
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the old policy'? |
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POLICY VALUES: |
New policies usually take longer to build cash values
and to |
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pay dividends. |
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Acquisition costs for the old policy may have been
paid, you |
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will incur costs for the new one. |
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What surrender charges do the policies
have? |
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What expense and sales charges will you pay on the
new policy? |
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Does the new policy provide more insurance
coverage? |
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INSURABILITY: |
If your health has changed since you bought your old
policy, |
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the new one could cost you more, or you could be
turned down. |
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You may need a medical exam for a new
policy. |
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Claims on most new policies for up to the first two
years can |
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be denied based on inaccurate statements. |
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Suicide limitations may begin anew on the new
coverage. |
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IF YOU ARE KEEPING THE OLD POLICY AS WELL AS THE NEW
POLICY: |
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How are premiums for both policies being
paid? |
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How will the premiums on your existing policy be
affected? |
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Will a loan be deducted from death
benefits? |
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What values from the old policy are being used to
pay |
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premiums? |
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IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST
SENSITIVE LIFE PRODUCT: |
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Will you pay surrender charges on your old
contract? |
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What are the interest rate guarantees for the new
contract? |
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Have you compared the contract charges or other
policy |
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expenses? |
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OTHER ISSUES TO CONSIDER FOR ALL
TRANSACTIONS: |
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What are the tax consequences of buying the new
policy? |
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Is this a tax free exchange? (See your tax
advisor.) |
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Is there a benefit from favorable "grandfathered"
treatment of |
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the old policy under the federal tax code? Will the
existing |
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insurer be willing to modify the old
policy? |
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How does the quality and financial stability of the
new |
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company compare with your existing
company? |
Statutory Authority:
8 V.S.A.
§§
15 and
4902
