BILL NUMBER: SB 713 INTRODUCED
BILL TEXT
INTRODUCED BY Committee on Insurance (Senators Calderon (Chair),
Anderson, Corbett, Correa, Gaines, Lowenthal, Price, and Wyland)
FEBRUARY 18, 2011
An act to add Article 11 (commencing with Section 10509.930) to
Chapter 5 of Part 2 of Division 2 of the Insurance Code, relating to
insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 713, as introduced, Committee on Insurance. Insurance:
proceeds: disclosure.
Existing law requires insurers to fulfill certain requirements
with regard to life insurance policies.
This bill, the Life Insurance Proceeds Disclosure Act of 2011,
would require insurers to provide written disclosures to life
insurance beneficiaries, as specified, before a retained asset
account, as defined, is selected or established as the benefit
payment. The bill would require an insurer that chooses to settle
life insurance benefits through a retained asset account to provide
the beneficiary with a supplemental contract that clearly discloses
the rights of the beneficiary and the obligations of the insurer
under the supplemental contract.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 11 (commencing with Section 10509.930) is added
to Chapter 5 of Part 2 of Division 2 of the Insurance Code, to read:
Article 11. Life Insurance Proceeds Disclosure Act of 2011
10509.930. This act shall be known and may be cited as the Life
Insurance Proceeds Disclosure Act of 2011.
10509.931. The Legislature finds and declares all of the
following:
(a) The occasion of the death of a spouse, parent, child, partner,
or other loved one is a difficult time, accompanied by severe
emotional stress, and is frequently a time of important and often
difficult financial decisions.
(b) Life insurance is intended to provide an important resource to
support and ease financial decisions at such a time.
(c) While life insurance policies provide for a single payment of
the death benefit, policies may also offer other alternative payout
options, through the use of a retained asset account that can provide
desired flexibility insofar as they fit the consumer's needs and the
needs of the consumer's family.
(d) The inherent difficulty of financial decisions at such a time
can be eased insofar as consumers know what their available payment
options are so they can receive the benefit of available life
insurance policy proceeds in the form best suited to their
circumstances and needs.
10509.932. The purpose of this act is to establish disclosure
standards regarding the payment of life insurance benefits to a
beneficiary by means of a retained asset account if a life insurance
company offers consumers a retained asset account or establishes such
an account as an alternative to the receipt of insurance proceeds by
a single payment.
10509.933. For the purposes of this article, the following terms
have the following definitions:
(a) "Insurer" means a life insurance company that provides
recipients of life insurance settlement proceeds the option of
receiving payment through the use of a retained asset account rather
than receiving a single or lump sum payment.
(b) "Retained asset account" means any mechanism where the
settlement of proceeds payable under a life insurance policy is
accomplished by the insurer, or an entity acting on behalf of the
insurer, by depositing the proceeds into an account with check or
draft writing privileges, and where those proceeds are retained by
the insurer, pursuant to a supplementary contract not involving
annuity benefits.
10509.934. The insurer shall provide the beneficiary of life
insurance proceeds, at the time a claim is made, written information
describing the settlement options available under the policy and how
to obtain specific details relevant to those options.
10509.935. If the insurer chooses to settle life insurance
benefits through a retained asset account, the insurer shall provide
the beneficiary with a supplemental contract that clearly discloses
the rights of the beneficiary and the obligations of the insurer
under the supplemental contract.
10509.936. The insurer shall provide the following written
disclosures to the beneficiary before the retained asset account is
selected, if optional, or established:
(a) Payment of the full benefit is accomplished by delivery of the
draft book or checkbook.
(b) One draft or check may be written to access the entire amount,
including interest, of the retained asset account at any time.
(c) Whether the available settlement options are preserved until
the entire balance is withdrawn or the balance drops below the
insurer's minimum balance requirements.
(d) A statement identifying the account as either a checking or
draft account and an explanation of how the account works.
(e) Information about the account services provided and contact
information where the beneficiary may request and obtain more details
about those services.
(f) A description of fees charged, if applicable.
(g) The frequency of statements showing the current account
balance, the interest credited, drafts or checks written, and any
other account activity.
(h) The minimum interest rate to be credited to the account and
how the actual interest rate will be determined.
(i) That the interest earned on the account may be taxable.
(j) Retained asset account funds held by insurance companies are
not guaranteed by the Federal Deposit Insurance Corporation, but are
guaranteed by the State Guaranty Associations.
(k) To learn more about the coverage limitations applicable to his
or her account, the beneficiary should contact the National
Organization of Life and Health Insurance Guaranty Associations,
www.nolhga.com.
(l) A description of the insurer's policy regarding retained asset
accounts that become inactive, including the policy with respect to
inactive accounts that are at risk of escheating to the state
pursuant to the California Unclaimed Property Law (Chapter 7 (
commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure).