New York Issues Accelerated Benefits Rules

Here are some of the new requirements:

- Any accelerated death benefits for long term care expenses must meet the requirements that the Internal Revenue Code sets out for LTC insurance policies that qualify for federal tax breaks.

- An application for a life insurance policy with LTC benefits must include a prominent notice warning applicants that receipt of accelerated death benefits might affect eligibility for public assistance programs.

- Sellers of life insurance policies with accelerated death benefit features must follow strict state guidelines when preparing illustrations. If an accelerated death benefit provides for a discounting feature, for example, then the illustration must assume that the death will occur within one year ("or such other mortality basis on file with the superintendent") and use an interest rate of 8%.

- The present value of the amounts to be accelerated may not exceed the policy death benefit, and life insurers must deduct the accelerated death benefits payments from the value of the ultimate death benefits. Life insurers can pay extra death benefits, but only if there are no premium requirements for such benefits once those benefits are being paid. Moreover, the insurer can pay a "residual death benefit" equal to 10% of the original death benefit, up to a maximum of $25,000, even if the insurer has paid out all of the required death benefits in the form of accelerated death benefits.

Links to the text of the proposed regulation and other information about the proposed regulation are at http://www.ins.state.ny.us/rproindx.htm