(a) Without limiting the ability of an insurer to assess the insurability of a policy applicant and in addition to other questions an insurance company may lawfully pose to a life insurance applicant, an insurance company may inquire in the application for life insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.

(b) If, as described in subdivision (11) of section 38a-465, the loan provides funds that can be used for a purpose other than paying for the premiums, costs and expenses associated with obtaining and maintaining the life insurance policy and loan, the application shall be rejected as a violation of section 38a-465i.

(c) If the financing does not violate section 38a-465i in this manner, the insurance company:

(1) May make disclosures including, but not limited to, the following, to the applicant and the insured, in the application or an amendment to the application completed not later than the delivery of the policy: “If you have entered into a loan arrangement where the policy is used as collateral and the policy does change ownership at some point in the future in satisfaction of the loan, the following may be true: (A) A change of ownership could lead to a stranger owning an interest in the insured's life; (B) a change of ownership could limit your ability to purchase future insurance on the insured's life because there is a limit to how much coverage insurers will issue on one life; (C) should there be a change of ownership and you wish to obtain more insurance coverage on the insured's life in the future, the insured's higher issue age, a change in health status or other factors may reduce the ability to obtain coverage or may result in significantly higher premiums; and (D) you should consult a professional advisor, since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan.”; and

(2) May require the applicant or the insured to certify that:

(A) Such applicant or insured has not entered into any agreement or arrangement providing for the future sale of such life insurance policy;

(B) The loan arrangement for this policy provides funds sufficient to pay for partial or full payment of the premiums, costs and expenses associated with obtaining and maintaining such life insurance policy, and that such applicant or insured has not entered into any agreement by which such applicant or insured will receive consideration in exchange for procuring such policy; and

(C) The borrower has an insurable interest in the insured.

(P.A. 97-202, S. 10, 18; P.A. 08-175, S. 9; P.A. 09-74, S. 21.)

History: P.A. 97-202 effective January 1, 1998; P.A. 08-175 replaced former Subsecs. (a) to (e) with new Subsecs. (a) to (c) re disclosures and certifications concerning premium finance loans; P.A. 09-74 made a technical change in Subsec. (c)(2)(B), effective May 27, 2009.