(a) An accelerated death benefit as defined in paragraph (1) of subdivision (b) of Section 10295 shall comply with, and shall explain all of, the following:
(1) That the accelerated death benefit is fixed at the time the insurer approves the request for the accelerated death benefit.
(2) That the payment of the accelerated death benefit is not conditioned on the receipt of long-term care or medical services.
(3) That the insured shall have the option to take the accelerated death benefit in a lump sum on the occurrence of a qualifying event, as well as an option to receive the benefit in periodic payments for a certain period only. The insured shall have the choice of requesting a lump sum that is equal to the maximum amount of the accelerated death benefit, or requesting a lump sum that is less than the maximum amount. For purposes of this paragraph, “lump sum” shall mean that a claim is paid in a single payment.
(4) That the accelerated death benefit may not restrict the insured’s use of the proceeds.
(5) That the payment of the accelerated death benefit is due immediately upon receipt of the due written proof of eligibility.
(6) That, prior to the payment of the accelerated death benefit, the insurer is required to obtain from an assignee or irrevocable beneficiary, if any, a signed acknowledgment of concurrence for payout. If the insurer making the accelerated death benefit is itself the assignee under the policy, the acknowledgment is not required.
(7) That if any death benefit remains after payment of an accelerated death benefit, the accidental death benefit provision, if any, in the policy shall not be affected by the payment of the accelerated death benefit.
(b) The accelerated death benefit shall also provide for all of the following:
(1) A maximum amount that may be accelerated.
(2) An explanation that the insured may accelerate more than once on a qualifying event up to the maximum amount.
(3) An explanation that the insured may accelerate on more than one of the qualifying events specified in the supplemental provision up to the maximum amount.
(4) A statement that the policy, rider, endorsement, or certificate pays proceeds that are or are not intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)), if applicable.
(c) The insurer shall advise the policyholder or certificate holder that there may be tax consequences of accepting an amount above the amount that would be tax qualified under the Internal Revenue Code.
(d) The accelerated death benefit shall not contain any preexisting condition limitation and shall not contain any requirement that acceleration be conditioned on a prior hospitalization or institutionalization.
(e) The accelerated death benefit shall contain an explanation of how the insured will pay for the accelerated death benefit, whether by paying a portion of the premium for the life insurance policy, by paying a fee at the time of the acceleration, by paying the cost of insurance charge, or by paying the administrative expense charge, together with an illustration. If there is a premium or cost of insurance charge, or a charge imposed upon the acceleration, a generic illustration numerically demonstrating any effect of the payment of a benefit on the policy’s cash value, accumulation account, death benefit, premium, policy loans, and policy liens shall suffice for this purpose.
(f) (1) Every accelerated death benefit that pays proceeds intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as such by prominently displaying and printing that intention on page one of the accelerated benefit policy provision, rider, endorsement, or certificate.
(2) Every accelerated death benefit that pays proceeds that are not intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as such by prominently displaying and printing that intention on page one of the accelerated death benefit policy provision, rider, endorsement, or certificate.
(Amended by Stats. 2018, Ch. 98, Sec. 6. (AB 2180) Effective January 1, 2019.)