Required Disclosure Provisions

Section 2012 Section 2012.60  Required Disclosure Provisions a)         Renewability.  Individual long-term care insurance policies shall contain a renewability provision.  The provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state that the coverage is guaranteed renewable or noncancellable.  This provision shall not apply to policies which do not contain a renewability provision and under which the right to nonrenew is reserved solely to the policyholder as long as required premiums are paid on time.  A long-term care insurance policy or certificate, other than one where the insurer does not have the right to change the premium, shall include a statement that premium rates may change. b)         Riders and Endorsements.  Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long-term care insurance policy, all riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the individual insured.  After the date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage are required by law.  Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, such premium charge shall be set forth in the policy, rider or endorsement. c)         Payment of Benefits.  A long-term care insurance policy or certificate that provides for the payment of benefits based on standards described as "usual and customary," "reasonable and customary" or words of similar import shall include a definition of such terms and an explanation of such terms in its accompanying outline of coverage. d)         Limitations:  If a long-term care insurance policy or certificate contains any limitations with respect to preexisting conditions, such limitations shall appear as a separate paragraph of the policy or certificate and shall be labeled "Preexisting Condition Limitations".  Limitations to preexisting conditions shall be in accordance with Section 351A-5 of the Code. e)         Other Limitations or Conditions on Eligibility for Benefits.  In addition to complying with Section 351A-6 of the Code, beginning August 30, 1990, a long-term care insurance policy or certificate containing any limitations or conditions for eligibility other than those prohibited in Section 351A-6 shall set forth a description of such limitations or conditions, including any required number of days of confinement in a separate paragraph of the policy or certificate and shall label such paragraph "Limitations or Conditions on Eligibility for Benefits". f)         Disclosure Requirements for Accelerated Life Products 1)         Policy Summary At the time of policy delivery, a policy summary shall be delivered for an individual life insurance policy that provides long-term care benefits within the policy or by rider.  This requirement does not apply to qualified long-term care insurance contracts.  In the case of direct response solicitations, the insurer shall deliver the policy summary upon the applicant's request, but regardless of request shall make delivery no later than at the time of policy delivery.  In addition to complying with all applicable requirements, the summary shall also include: A)        an explanation of how the long-term care benefit interacts with other components of the policy, including deductions from death benefits; B)        an illustration of the amount of benefits, the length of benefit, and the guaranteed lifetime benefits if any, for each covered person; C)        any exclusion, reductions and limitations on benefits of long-term care; and D)        if applicable to the policy type, the summary shall also include: i)          disclosure of the effects of exercising other rights under the policy; ii)         disclosure of guarantees related to long-term care costs of insurance charges; and iii)        current and projected maximum lifetime benefits. 2)         Benefit Reports Any time a long-term care benefit, funded through a life insurance vehicle by the acceleration of the death benefit, is in benefit payment status, a monthly report shall be provided to the policyholder.  The report shall include: A)        any long-term care benefits paid during the month; B)        an explanation of any changes in the policy, including changes in death benefits or cash values, due to long-term care benefits being paid out; and C)        the amount of long-term care benefits existing or remaining. 3)         Outline of Coverage The Outline of Coverage should include an example filled out in John Doe form that illustrates how the long-term care benefit is calculated.  Refer to Section 2012.110 and Exhibit C for format and content requirements. g)         Disclosure of Tax Consequences.  With regard to life insurance policies that provide an accelerated benefit for long-term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted, that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor.  This disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents.  This subsection (g) shall not apply to qualified long-term care insurance contracts. h)         Benefit Triggers.  Activities of daily living and cognitive impairment shall be used to measure an insured's need for long-term care and shall be described in the policy or certificate in a separate paragraph and shall be labeled "Eligibility for the Payment of Benefits".  Any additional benefit triggers shall also be explained in this paragraph.  If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description.  If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified. i)          A qualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in Exhibit C(3) that indicates that the policy is intended to be a qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended (26 USC 7702B(b)). j)          A nonqualified traditional long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage as contained in Exhibit C(3).  The disclosure statement shall indicate that the policy is not intended to be a qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended (26 USC 7702B).