Ala. Admin. Code r. 482-3-004-.11

Current through Register Vol. 43, No. 02, November 27, 2024

Section 482-3-004-.11 - Using Life Insurance Or Annuities To Fund A Preneed Contract For Funeral Or Cemetery Merchandise And Services

(1) The offering and sale of life insurance or annuities intended to fund future performance of funeral or cemetery preneed contracts must comply with all applicable sections of the Alabama insurance code [Ala. Code Tit. 27] and applicable insurance regulations.

(2) Life insurance or annuities may only be offered through insurance companies authorized by the Commissioner to engage in the business of life insurance in Alabama. All policy and related forms must have been reviewed and approved by the Commissioner prior to use.

(3) Except as provided in paragraph (4), any registered preneed sales agent or other employee of a preneed provider who engages in the solicitation, negotiation, or sale of an individual life insurance policy or annuity contract must be actively licensed as an insurance producer qualified in the life line and as to the type of annuity offered, and must be properly appointed by the insurance company whose product is being offered. A business entity certificate holder may hold a business entity producer license, but at least one employee of that entity must hold an individual producer license and be designated by the entity as the person responsible for the entity's compliance with insurance laws. Appropriate licensing and insurer appointment are required in order to receive payment of commissions for the sale of life insurance or annuities.

(4) A registered preneed sale agent or other employee of a preneed provider need not hold an insurance producer license if:

(a) The life insurance product being offered is group life insurance;

(b) The agent's or employee's insurance-related activity is strictly limited to obtaining information needed to enroll a preneed contract beneficiary in a group insurance plan or to issue that person a certificate of insurance under a group insurance plan; and

(c) The agent or employee is not paid a commission for the activity.

(5) Life insurance sold to fund a preneed contract must cover not less than the initial retail price of the preneed contract. This does not prohibit the use of life insurance products which have graded or limited death benefit features. Annuities sold to fund a preneed contract must ultimately cover not less than the initial retail price of the preneed contract. Preneed contracts funded by a combination of annuity and life insurance must ultimately cover not less than the initial retail price of the preneed contract. The life insurance or annuity contract written or assigned to fund the preneed contract must be written or assigned at the time the preneed contract is executed.

(6) The preneed contract must disclose that individual or group life insurance or an annuity is the preneed contract funding mechanism. The preneed contract shall not state, represent, or tend to cause confusion that the contact is trust-funded or that the preneed provider will be placing any portion of the contract's purchase price in a trust.

(7) The requirements of Alabama Insurance Regulation, Chapter 482-1-078, apply to the sale of individual or group life insurance or an annuity incident to sale of a preneed contract. Premium payments for life insurance or an annuity consideration must be made to the order of the insurance company, not the preneed provider. If payment is tendered to the preneed provider authorized by the insurance company to receive payments, the preneed provider must furnish a receipt complying with Rule 482-1-078-.05. The preneed provider shall immediately remit funds collected as premium payments to the insurance company.

Ala. Admin. Code r. 482-3-004-.11

Adopted by Alabama Administrative Monthly Volume XXXIII, Issue No. 02, November 26, 2014, eff. 1/1/2015.

Author: Commissioner of Insurance

Statutory Authority:Code of Ala. 1975, §§ 27-2-17, 27-17A-1 to -57 (2014).