Key Takeaways
- New York has specific regulations for credit life and credit disability insurance
- Accelerated death benefits must be offered on life insurance policies
- Viatical and life settlements are regulated under New York law
- New York prohibits genetic discrimination in life and health insurance
- STOLI (Stranger-Originated Life Insurance) is prohibited in New York
Special Insurance Topics in New York
New York regulates several special areas of life and health insurance that may appear on the licensing exam.
Credit Life and Credit Disability Insurance
Credit insurance pays off debt if the borrower dies or becomes disabled:
Credit Life Insurance
| Feature | New York Requirement |
|---|---|
| Coverage | Must not exceed debt amount |
| Beneficiary | Creditor |
| Premium | May be included in loan |
| Disclosure | Must disclose it's optional |
Credit Disability Insurance
| Feature | New York Requirement |
|---|---|
| Coverage | Monthly loan payments during disability |
| Waiting Period | As specified in policy |
| Duration | Until recovery or debt paid |
| Disclosure | Must disclose it's optional |
Key Consumer Protections
- Credit insurance must be disclosed as optional
- Cannot require as condition of loan
- Coverage cannot exceed debt
- Refund of premium if loan paid early
Exam Tip: Credit life and credit disability insurance must be disclosed as OPTIONAL. The borrower cannot be required to purchase it.
Accelerated Death Benefits
New York requires life insurers to offer accelerated death benefits:
What Are Accelerated Benefits?
- Allow early payment of death benefit
- Available for terminal illness
- Reduces death benefit by amount paid
- Helps pay medical and living expenses
New York Requirements
| Aspect | Requirement |
|---|---|
| Availability | Must be offered |
| Triggers | Terminal illness (typically 12-24 months) |
| Amount | Portion of death benefit |
| Cost | May reduce benefit or charge fee |
Viatical and Life Settlements
New York regulates the sale of life insurance policies:
What Is a Viatical Settlement?
- Terminally ill person sells life policy
- Receives less than death benefit in cash
- Buyer becomes owner and beneficiary
- Buyer pays future premiums
What Is a Life Settlement?
- Non-terminal policyholder sells policy
- Usually seniors over 65
- Same structure as viatical
New York Viatical/Life Settlement Regulation
| Requirement | Detail |
|---|---|
| Licensing | Providers and brokers must be licensed |
| Disclosure | Must disclose alternatives |
| Waiting Period | Generally 2-year policy ownership required |
| Tax Information | Must inform of tax consequences |
Consumer Protections
- 15-day rescission period after contract
- Must disclose impact on government benefits
- Cannot require waiver of rights
- Privacy protections for medical information
Genetic Discrimination Prohibition
New York prohibits genetic discrimination in insurance:
What Is Prohibited
| Action | Prohibition |
|---|---|
| Requiring Testing | Cannot require genetic testing |
| Using Results | Cannot use genetic test results in underwriting |
| Adverse Action | Cannot deny or rate based on genetics |
| Family History | Limited use of family history |
Scope of Protection
- Applies to life insurance
- Applies to health insurance
- Federal GINA provides additional health protections
STOLI Prohibition
Stranger-Originated Life Insurance (STOLI) is prohibited in New York:
What Is STOLI?
- Life insurance arranged by someone without insurable interest
- Investor funds premium
- Investor becomes beneficiary
- Violates insurable interest requirement
Why It's Prohibited
- Violates public policy
- Creates moral hazard
- Treats life insurance as speculative investment
- May involve fraud
Must credit life insurance be disclosed as optional to borrowers in New York?
What triggers accelerated death benefits in New York?
What is STOLI and what is its status in New York?
Can New York health insurers require genetic testing as a condition of coverage?
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