N.Y. Insurance Law § 3230: Accelerated payment of the death benefit or special surrender value under a life insurance policy

§ 3230. Accelerated payment of the death benefit or special surrender

value under a life insurance policy. (a) The application for a life

insurance policy or policy rider which provides for accelerated payment

of death benefits or a special surrender value shall:

(1) contain a notice, prominently displayed, to read as follows:

"Receipt of accelerated death benefits may affect eligibility for public

assistance programs and may be taxable."; and

(2) include the amount of any additional premium associated with the

accelerated payment or, if there is no separately identifiable premium,

whether a discount is associated with acceleration.

(b) The application to accelerate benefits shall:

(1) be dated by the insurer upon transmittal and shall be completed

and signed by the policy owner not more than thirty days thereafter; and

(2) contain a notice, prominently displayed, to read as follows:

"Receipt of accelerated death benefits may affect eligibility for public

assistance programs such as medical assistance (medicaid), family

assistance and supplemental security income. Receipt of accelerated

death benefits in periodic payments may be treated differently than

receipt in a lump sum. Prior to applying for accelerated death benefits,

policyowners should consult with the appropriate social services agency

concerning how receipt will affect the eligibility of the recipient

and/or the recipient's spouse or dependents."

(3) contain a notice, prominently displayed, to read as follows:

"Receipt of accelerated death benefits may be taxable. Receipt of

accelerated death benefits in periodic payments may be treated

differently than receipt in a lump sum. Prior to applying for such

benefits, policy owners should seek assistance from a qualified tax

adviser."; and

(4) contain a statement by the policy owner that such application is

voluntary and without coercion on the part of any third party; and

(5) contain a statement of the remaining death benefit available to

the beneficiary.

(c) Insurers are prohibited from paying accelerated death benefits or

special surrender values to the policy owner or certificate holder for a

period of five days from the date on which the information specified in

subdivision (d) of this section is transmitted in writing to the policy

owner or certificate holder. The policy owner or certificate holder

shall have the right to rescind the request for such payments at any

time during the process of application for said benefits.

(d) Within five day of receipt of an application to accelerate

benefits an insurer must provide the policy owner with the following:

(1) an illustration demonstrating the effect of the accelerated

benefit on the policy's cash value and policy loans;

(2) a numerical computation of the amount of the death benefit which

would be payable upon death;

(3) a numerical computation of the amount of the death benefit that

would be payable upon acceleration; and

(4) a notice that other means may be available to achieve the intended

goal, including a policy loan.

(e) A group life insurance policy which provides for accelerated

payment of death benefits or a special surrender value must provide that

only the certificateholder has the right to accelerate the benefits.

(f) This section shall apply to all life insurance policies or policy

riders or provisions thereof that provide for accelerated payment of

death benefits or a special surrender value pursuant to subparagraph

(A), (B), (C), (D), (E) or (F) of paragraph one of subsection (a) of

section one thousand one hundred thirteen of this chapter.