NOTICE REGARDING REPLACEMENT
REPLACING YOUR LIFE INSURANCE POLICY OR ANNUITY?
Are you thinking about buying a new life insurance policy or annuity and discontinuing or changing an existing one? If you are, your decision could be a good one — or a mistake. You will not know for sure unless you make a careful comparison of your existing benefits and the proposed policy or contract’s benefits.
Make sure you understand the facts. You should ask the insurer or agent that sold you your existing policy or contract to give you information about it.
Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest.
Ins 2.07 Appendix III
IMPORTANT NOTICE:
REPLACEMENT OF LIFE INSURANCE OR ANNUITIES
You are contemplating the purchase of a life insurance policy or annuity contract. In some cases this purchase may involve discontinuing or changing an existing policy or contract. If so, a replacement is occurring. Financed purchases are also considered replacements.
A replacement occurs when a new policy or contract is purchased and, in connection with the sale, you discontinue making premium payments on the existing policy or contract, or an existing policy or contract is surrendered, forfeited, assigned to the replacing insurer, or otherwise terminated or used in a financed purchase.
A financed purchase occurs when the purchase of a new life insurance policy involves the use of funds obtained by the withdrawal or surrender of or by borrowing some or all of the policy values, including accumulated dividends, of an existing policy, to pay all or part of any premium or payment due on the new policy. A financed purchase is a replacement.
You should carefully consider whether a replacement is in your best interests. You will pay acquisition costs and there may be surrender costs deducted from your policy or contract. You may be able to make changes to your existing policy or contract to meet your insurance needs at less cost.
A financed purchase will reduce the value of your existing policy and may reduce the amount paid upon the death of the insured.
We want you to understand the effects of replacements and ask that you answer the following questions and consider the questions on the back of this form.
1. Are you considering discontinuing making premium payments, surrendering, forfeiting, assigning to the insurer, or otherwise terminating your existing policy or contract? ___ YES ___ NO
2. Are you considering using funds from your existing policies or contracts to pay premiums due on the new policy or contract?
___ YES ___ NO
Please list each existing policy or contract you are contemplating replacing (include the name of the insurer, the insured, and the policy or contract number if available) and whether each policy or contract will be replaced or used as a source of financing:
INSURER
NAME
CONTRACT OR POLICY #
INSURED OR ANNUITANT
REPLACED (R) OR FINANCING (F)
1.
2.
3.
Make sure you know the facts. Contact your existing insurer or its agent for information about the existing policy or contract. If you request one, an in force illustration, policy summary or available disclosure documents must be sent to you by the existing insurer. Ask for and retain all sales material used by the agent in the sales presentation. Be sure that you are making an informed decision.
I certify that the responses herein are, to the best of my knowledge, accurate:
__________________________________________________________________________________________
Applicant’s Signature and Printed Name and Date
A replacement may not be in your best interest, or your decision could be a good one. You should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract. One way to do this is to ask the insurer or agent that sold you your existing policy or contract to provide you with information concerning your existing policy or contract. This may include an illustration of how your existing policy or contract is working now and how it would perform in the future based on certain assumptions. Illustrations should not, however, be used as a sole basis to compare policies or contracts. You should discuss the following with your agent to determine whether replacement or financing your purchase makes sense:
PREMIUMS: Are they affordable?
Could they change?
You’re older — are premiums higher for the proposed new policy?
How long will you have to pay premiums on the new policy? On the existing policy?
POLICY VALUES: New policies usually take longer to build cash values and to pay dividends.
Acquisition costs for the existing policy may have been paid, you will incur costs for the new one.
What surrender charges do the policies have?
What expense and sales charges will you pay on the new policy?
Does the new policy provide more insurance coverage?
INSURABILITY: If your health has changed since you bought your existing policy, the new one could cost you more, or you could be turned down.
You may need a medical exam for a new policy.
Claims on most new policies for up to the first two years can be denied based on inaccurate statements.
Suicide limitations may begin anew on the new coverage.
IF YOU ARE KEEPING THE EXISTING POLICY AS WELL AS THE NEW POLICY:
How are premiums for both policies being paid?
How will the premiums on your existing policy be affected?
Will a loan be deducted from death benefits?
What values from the existing policy are being used to pay premiums?
IF YOU ARE SURRENDERING AN ANNUITY OR INTEREST SENSITIVE LIFE PRODUCT:
Will you pay surrender charges on your existing contract?
What are the interest rate guarantees for the new contract?
Have you compared the contract charges or other policy expenses?
OTHER ISSUES TO CONSIDER FOR ALL TRANSACTIONS:
What are the tax consequences of buying the new policy?
Is this a tax free exchange? (See your tax advisor.)
Is there a benefit from favorable “grandfathered” treatment of the existing policy under the federal tax code?
Will the existing insurer be willing to modify the existing policy?
How does the quality and financial stability of the new insurer compare with your existing insurer?
Ins 2.08Ins 2.08 Special policies and provisions; prohibitions, regulations, and disclosure requirements. Ins 2.08(1)(1) Purpose. The interest of the public and the maintenance of a fair and honest life insurance market must be safeguarded by identifying and prohibiting certain types of policy forms and policy provisions and by requiring certain insurance premiums to be separately stated. This rule implements and interprets applicable statutes including ss. 628.34, 631.20, 632.44 (1) and 632.62, Stats. Ins 2.08(2)(2) Scope. This rule shall apply to the kinds of insurance authorized by s. Ins 6.75 (1) (a), and shall also apply to fraternal benefit societies. Ins 2.08(3)(3) Definitions. For the purpose of this rule certain life insurance policy forms and provisions referred to herein shall have the following meaning: Ins 2.08(3)(a)(a) “Coupon policy” is any policy form which includes a series of coupons prominently and attractively featured in combination with an insurance contract. Such coupons are one-year pure endowments whether or not so identified and whether or not physically attached to the insurance contract. The coupons are devised to give the appearance of the interest coupons that are frequently attached to investment bonds. Although the face amount of the coupon benefit is essentially a refund of premium previously paid by a policyholder, it is frequently represented that is the earnings or return on the investment of the policyholder in life insurance. Ins 2.08(3)(b)(b) “Charter policy” is a term or name assigned by an insurance company to a policy form. Such a policy is usually issued by a newly organized company and it is sold on the basis that its availability will be limited to a specific predetermined number of units of a fixed dollar amount. Such policies generally provide that the policyholder shall participate in the earnings resulting from either or both participating policies and non-participating policies. It is characteristic of such a policy that in its presentation to the public it is represented that the policyholder will receive a special advantage in any future distribution of earnings, profits, dividends or abatement of premium. It is also represented that such advantage will not be made available to the persons holding other types of policies issued by the company. Other names such as Founders, President, and Executive Special are frequently used for policies of the type herein described, and for the purpose of this rule when they are so used they shall be considered as charter policies. Ins 2.08(3)(c)(c) A “Profit-sharing policy” is any policy form which contains provisions representing that the policyholder will be eligible to participate, with special advantage not available to the persons holding other types of policies issued by the same company, in any future distribution of general corporate profits. Such policy forms are so drafted that it appears to a prospective policyholder that he or she is purchasing a preferential share of the future profit and earnings of the insurance corporation rather than purchasing a life insurance policy which may be subject to refund of excess premium payments. The provisions of the policy may incorrectly represent the amount and source of surplus that will be available for apportionment and return to policyholders in the form of dividends. Policy forms using such terms as profits, surplus, or surplus-sharing in the manner herein described shall, for the purpose of this rule, be considered as profit-sharing policies. Ins 2.08(4)(4) Prohibitions, regulations, and disclosure requirements. In accordance with the purpose expressed in sub. (1) and in consideration of the apparent intent of the legislature, the use in this state of certain types of policy forms and policy provisions shall be subject to the following prohibitions and regulations: Ins 2.08(4)(a)(a) Coupon policy forms misrepresent, distort, and disguise the true nature of the insurance purchased. Therefore, no coupon policy shall be approved for use and no coupon policy heretofore approved shall be issued or delivered in this state on or after June 15, 1962. Ins 2.08(4)(b)(b) Any policy, except a policy which is only used as a funding medium to provide gifts to a corporation without profit, as provided in s. 615.04, Stats., containing a series of one-year pure endowments or a series of guaranteed periodic benefits maturing during the premium-paying period of the policy in which the amount of any pure endowment or periodic benefit or benefits payable during any policy year is less than the total annual policy premium for such year has special characteristics making such policy peculiarly susceptible to misrepresentation and misunderstanding. Such policies are founded on the utmost good faith of the company, and the public interest requires that the premium charged for such benefits shall be fully and fairly disclosed to the policyholder without deception or misrepresentation. Therefore, on or after April 1, 1965, no such policy herein described shall be approved for use and no such policy heretofore approved shall be issued or delivered in this state unless: Ins 2.08 NoteNote: Section 615.04, Stats., was repealed.
Ins 2.08(4)(b)2.2. The payment of a pure endowment or guaranteed periodic benefit is not contingent on the payment of premiums falling due on or after the time such pure endowment has matured, Ins 2.08(4)(b)3.3. The gross premium for the pure endowment or guaranteed periodic benefits is shown prominently and separately in the policy distinct from the regular insurance premium, Ins 2.08(4)(b)4.4. The gross premium for the pure endowment or guaranteed periodic benefits is based on reasonable assumptions as to interest, mortality, and expense, Ins 2.08(4)(b)5.5. The number of one-year endowment or guaranteed periodic benefits provided by the policy equals the number of annual premiums for such benefits, Ins 2.08(4)(b)6.6. All advertisements, sales materials, agent’s presentations, and other representations of the policy to the public represent the pure endowment or guaranteed periodic benefits of the policy to be nothing other than insurance benefits for which a premium is being paid, Ins 2.08(4)(b)7.7. All representations of the total premium for the policy contract also show the gross premium for the pure endowment or guaranteed periodic benefits to an extent such that the prospect or purchaser is fully informed as to the separate costs involved. Ins 2.08(4)(c)(c) Charter policy forms are defined by s. 628.33, 1987 stats., to be an unfair method of competition. They purport to provide a means to an end result that is not authorized by statute and an end result that is without reasonable expectation of achievement. Such policy forms misrepresent the responsibility and obligation of the company for equitable distribution of dividends or abatement of premiums. Therefore, no charter policy shall be approved for use and no charter policy heretofore approved shall be issued or delivered in this state on or after June 15, 1962. Ins 2.08(4)(d)(d) Profit-sharing policy forms are contrary to statute and the public interest by representing as an inducement to insurance that the person who purchases such a policy is procuring a preferential interest in the future profits and earnings of the insurance corporation. Any distribution to a policyholder of the company of earnings, profits, or surplus is a refund of the excess premiums paid by that policyholder. Such distribution must be fair and equitable to all policyholders, it must not discriminate unfairly between individuals of the same class and equal expectation of life, and it must be in the best interest of the company and its policyholders. Therefore, no profit-sharing policy shall be approved for use and no profit-sharing policy heretofore approved shall be issued or delivered in this state on or after June 15, 1962. Further, on or after June 15, 1962, no participating policy shall be approved and no participating policy heretofore approved shall be issued or delivered in this state unless the policy provides without deception or misrepresentation that the source of any dividends or abatement of premium is limited to the divisible surplus derived from participating business. Ins 2.08 NoteNote: See historical note relating to s. Ins 2.08 as printed with this rule as released in December, 1984. Ins 2.08 HistoryHistory: Cr. Register, May, 1962, No. 77, eff. 6-15-62; am. (4) (b), Register, August 1964, No. 104, eff. 12-1-64; am. (4) (b) (intro. par.), Register, March, 1965, No. 111, eff. 4-1-65. emerg. am. (1) and (2), eff. 6-22-76; am. (1) and (2), Register, September, 1976, No. 249, eff. 10-1-76; am. (2), Register, March, 1979, No. 279, eff. 4-1-79; am. (4) (b) (intro.), Register, January, 1984, No. 337, eff. 2-1-84; r. (5) under s. 13.93 (2m) (b) 16., Stats., Register, December, 1984, No. 348; correction in (4) (c) made under s. 13.93 (2m) (b) 7., Stats., Register, April, 1992, No. 436; correction in (2) (c) made under s. 13.93 (2m) (b) 5., Stats., Register, June, 1997, No. 498. Ins 2.09Ins 2.09 Separate and distinct representations of life insurance. Ins 2.09(1)(1) Purpose. The interests of policyholders and purchasers of life insurance which is sold in connection with any security must be safeguarded by providing them with clear and unambiguous written proposals and statements in which all material relating to life insurance is set forth separately from any other material. This rule implements and interprets s. 628.34, Stats., by establishing minimum standards for the form of proposals and statements used to solicit, service, or collect premiums for life insurance which is sold in connection with a mutual fund or other security. Ins 2.09(2)(2) Scope. This rule shall apply to the solicitation of, negotiation for, procurement of, or joint billing of any insurance specified in s. Ins 6.75 (1) (a), within this state or involving a resident of this state where it is known to the insurer or the insurance agent that the sale of any mutual fund or other security has been, may become, or is a part of any such transaction. Ins 2.09(3)(3) Definitions. For the purposes of this rule: Ins 2.09(3)(a)(a) “Proposal” includes any estimate, illustration, or statement which involves a representation of any premium charge, dividends, terms, or benefits of any policy of life insurance within sub. (2). Ins 2.09(3)(b)(b) “Life insurance” includes life insurance, annuities, and endowments. Ins 2.09(4)(4) Responsibility of insurer and agent. No insurer and no insurance agent shall make, in connection with any transaction within sub. (2), a proposal or billing other than in accordance with this rule. Every insurer must inform its agents involved with the solicitation of life insurance on residents of this state of the requirements of this rule. Ins 2.09(5)(5) Written proposal. In any solicitation or sale within sub. (2), the prospect or policyholder must be furnished with a copy of a clear and unambiguous written proposal not later than at the time the solicitation or proposal is made. Ins 2.09(6)(6) Contents of proposal. Any proposal referred to in this rule must:
