California became the 34th state to regulate life settlements when Gov. Arnold Schwarzenegger of California signed Bill S.B. 98. The bill preserves a policyholder’s right to sell the life insurance policy for value prior to lapse or surrender. Additionally, individuals can obtain life settlements through an agent, an prohibit insurance companies from restricting life insurance agents from informing policyholders about such settlements. The law provides stronger consumer-orientated provisions, including licensing mandates for brokers and settlement companies, requiring disclosures regarding offers, business relationships and compensation, permits lawful transfers of policy ownership, and allows policyholders to cancel a settlement within 30 days of settlement or 15 days after receiving proceeds.
The Bill will no longer allow policyholders to purchase policies for investors or sale of an existing policy to a third-party for more than the cash surrender value for two years after it was issued. Moreover, terminally ill individuals who sell a policy must be of sound mind and certified by a physician.
It has been estimated that the life insurance settlement market will grow from approximately $10 billion to an estimated $150 billion in the next 10 years.
For a copy of the Bill click here
Kimberly Whistler and Daniel Gerber