N.Y. Insurance Law § 7812: Life insurance applications

§ 7812. Life insurance applications. (a) Without limiting the ability

of an insurer to assess the insurability of a policy applicant and to

determine whether or not to issue the policy, and in addition to other

questions an insurer may lawfully pose to a life insurance applicant,

insurers may inquire in the application for 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) The insurer may include the following notice to the applicant and

the insured, or other notice acceptable to the superintendent, on the

application or as an amendment thereto: "If you enter into a loan

arrangement where the policy is used as collateral, and the policy

changes ownership at some point in the future in satisfaction of the

loan, then the following may be true:

(1) a change of ownership may lead to a person unknown to you owning

an interest in the insured's life;

(2) a change of ownership may limit your ability to purchase insurance

in the future on the insured's life because there is a limit to how much

coverage insurers will issue on one life;

(3) if ownership of the life insurance policy changes, 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, and/or other

factors may reduce the ability to obtain coverage and/or may result in

significantly higher premiums; and

(4) you should consult a professional advisor, since a change in

ownership in satisfaction of the loan may result in tax consequences to

the owner."