Policyowners of permanent life insurance policies must be provided nonforfeiture options, in the event that premium payments cease before the policy is paid up. The three nonforfeiture options are 1.) cash, 2.) reduced paid-up, and 3.) extended term. Nonforfeiture laws apply to all individual life insurance policies that build cash value. The law does not apply to group insurance, variable life, annuity contracts, reinsurance, pure endowments and term policies.
In Alabama, the cash nonforfeiture option is not required for ordinary life insurance policies until the policyowner has paid premiums for at least 3 years. For industrial life policies, premiums must have been paid for at least 5 years. For both types of policies, the insurance company is legally permitted to defer payment of cash surrender for up to 6 months from the date of request.
An advertisement is material designed to create public interest to persuade the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a policy. It includes pamphlets, brochures, letters, illustrations, sales presentations, newspaper ads, radio and t.v. ads.
Advertisements do not include:
-Communications or materials used internally within an insurance company;
-Administrative communications with policyholders; and
-A general announcement from a group or blanket policyholder that coverage has been arranged.
Advertisements must be truthful and not misleading in fact or by implication. The form and content of an advertisement of a policy will be sufficiently complete and clear so as to avoid deception. It will not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive will be determined by the Commissioner of Insurance from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.
No advertisement will use the terms "investment," "investment plan," "founder's plan," "charter plan," "deposit," "expansion plan," "profit," "profits," "profit sharing," "interest plan," "savings," "savings plan," "private pension plan," "retirement plan" or other similar terms in connection with a policy in a context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospective purchaser of such policy to believe that he will receive, or that it is possible that he will receive, something other than a policy or some benefit not available to other persons of the same class and equal expectation of life.
-An advertisement will not omit material information or use words, phrases, statements, references or illustrations if the omission or use has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered, premium payable, or state or federal tax consequences.
-An advertisement will not use as the name or title of a life insurance policy any phrase that does not include the words "life insurance" unless accompanied by other language clearly indicating it is life insurance.
-An advertisement for a policy with non-level premiums will prominently describe the premium changes.
-An advertisement will not use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up, to describe a plan using nonguaranteed elements to pay a portion of future premiums.
-An advertisement will not state or imply that the payment or amount of nonguaranteed elements is guaranteed.
-If the individual making a testimonial, appraisal, analysis or an endorsement has a financial interest in the insurer or related entity as a stockholder, director, officer, employee or otherwise, or receives any benefit directly or indirectly other than required union scale wages, that fact will be prominently disclosed in the advertisement.
-The name of the insurer will be clearly identified in all advertisements about the insurer or its products.
A producer who initiates an application will submit to the insurer, with or as part of the application, a statement signed by both the applicant and the producer as to whether the applicant owns existing, in-force policies or contracts on the same insured or annuitant. If the answer is "no," the producer's duties with respect to replacement are complete.
If the applicant answered "yes" to the question regarding existing coverage, the producer will present and read to the applicant, not later than at the time of taking the application, a Notice Regarding Replacements. However, no approval will be required when amendments to the notice are limited to the omission of references not applicable to the product being sold or replaced. The notice will be signed by both the applicant and the producer and left with the applicant. If the notice is presented electronically, the insurance company must mail the applicant a copy of the notice within 3 business days after receipt of the application.
The notice will list all life insurance policies or annuities proposed to be replaced, properly identified by name of insurer, the insured or annuitant, and policy or contract number if available; and will include a statement as to whether each policy or contract will be replaced or whether a policy will be used as a source of financing for the new policy or contract. If a policy or contract number has not been issued by the existing insurer, alternative identification, such as an application or receipt number, will be listed.
In connection with a replacement transaction the producer will leave with the applicant at the time an application for a new policy or contract is completed the original or a copy of all sales material. With respect to electronically presented sales material, it will be provided to the policy or contract owner in printed form no later than at the time of policy or contract delivery.