In November 2004, Wisconsin enacted a new law regarding the suitability of annuity sales and recommendations to senior consumers age 65 or older. In April 2008, Wisconsin amended its suitability law to apply to all consumers regardless of age. This change first applies to annuity contracts issued on or after October 1, 2008.
Under Wisconsin's suitability law, insurance companies and agents offering annuity products to consumers are required to make reasonable efforts to obtain information from a consumer about his or her financial status, tax status, investment objectives, and any other information that is reasonably appropriate for determining suitability before making a recommendation involving an annuity to a consumer.
An insurance company or agent may not make a recommendation that results in the purchase or exchange of an annuity unless there are reasonable grounds to believe that the recommendation is suitable for the consumer based on the information disclosed by the consumer.
If you
decide to offer group life
insurance to employees in the state of Wisconsin, shop around for the best
rates and packages through several insurance companies/agents first. You may
want to purchase all of your group packages (health insurance, disability insurance, etc.) through one
company/agent after you have assessed all your options in order to make it easier
to track policies and make payments.
A simple
comparison of the premiums, a cash payment that’s required to fund your policy,
is not enough. There are other things to consider.
- Do premiums or
benefits vary from year to year?
- How much do the
benefits build up in the policy?
- What part of the
premiums or benefits is not guaranteed?
- What is the effect
of interest on money paid and received at different times on the policy?
Review
your group plans regularly as your business grows. Examine how your group life insurance needs and premiums may
change as a result of added employees or new capabilities your company offers.
If you're
going to provide workers with voluntary group life insurance, check whether the
policy you're offering allows them to carry the plan over to a new company
should they decide to change jobs. Also see if there are additional conditions
in the policy that can make it more flexible for the employee, such as a waiver
of premiums when a worker is on disability leave and may not have the funds to
pay for the policy during that time.
The owner of any rights under an individual
life insurance policy or
annuity contract may assign any of those rights, including any right to designate a beneficiary. An assignment which is valid under general contract law vests the assigned rights in the assignee (the person to whom the assignment is made) subject to any provision in the
insurance policy or
annuity contract inserted to protect the insurer against double payment or obligation.
The rights of the beneficiary under a
life insurance policy or annuity contract are subordinate to those of an assignee, unless the beneficiary was effectively designated as an irrevocable beneficiary prior to the assignment.
Assignment may be expressly prohibited by a group contract providing annuities as retirement benefits, and by an annuity that is subject to transferability restrictions under any federal or state tax, employee benefit, or securities law.
Examples:
• The owner of an individual whole life insurance policy notified the company that the rights to the death benefits were being assigned to her sister. There is no provision in the policy which restricts the policyholder’s right to assign the rights under the policy. The assignment was made in writing and the owner received something of value from her sister in return. Assuming that the insured’s sister was not the beneficiary under the policy, is the company obligated to pay the benefits to the sister-assignee?
Yes. The assignment is valid under general contract law and vests the assigned rights in the sister-assignee. Under s632.47,
Wisconsin State, the rights of the sisterassignee to receive the death benefits take priority over the rights of the beneficiary.
• The holder of an individual annuity contract assigned the rights to the annuities to his friend who was not the beneficiary under the policy. The assignment was in writing and made in exchange for something of value. The policy contains a provision which expressly stated that the designation of beneficiary was irrevocable. The insured died and the friend-assignee claimed the death benefits under the assignment contract. Is the insurance company obligated to pay the benefits to the friend-assignee?
No. Under an assignment under s. 632.47, Wis. Stat., the friend-assignee takes effective rights to the
death benefits unless the beneficiary was “effectively designated as an irrevocable beneficiary prior to the assignment.” Since the prior policy contains such a restriction on the assignment, the assignment to the friend-assignee is subordinate to the beneficiary. The death benefits go to the designated beneficiary.
If the age of the person whose life is at risk is misstated in a
life insurance application and the error is not adjusted during his or her lifetime, the amount payable under the policy is what would be paid if the age had been stated correctly. The insurer is not liable for
death benefits if the insured was older than the age limit designated by the insurer for issuance of the policy.
Examples:
The holder of an individual
term life insurance policy in
Wisconsin was killed in an automobile accident. The insured was under the maximum age limit designated by the
insurance company. The insured’s wife, who was named as beneficiary, filed a claim with the insurance company for the death benefits. The company refused to honor the claim on the ground that the insured misstated his age in the application. Can the insurance company refuse payment?
No. Under s. 632.46 (3), Wis. Stat., if the age of the insured is misstated on the application for the policy and the error is not adjusted during his lifetime, the amount payable under the policy is what the premiums paid would have purchased if the age had been stated correctly.
• The holder of an individual term life insurance policy suffered a fatal heart attack four years after the policy was issued. The contract contained a two-year incontestability provision. At the time of application for insurance, the insured had mistakenly answered in writing that he had no prior physical problems with his heart, although he had been treated for minor coronary ailments including high blood pressure. Can the insurance company now refuse to pay the claim on the ground that the insured had made a material misrepresentation which allowed the company to void the policy?
No. Under s. 632.46 (1), Wis. Stat., once the policy has been in effect for two years, the insurance company may not contest the policy
Subject to the relative rights of the assignee and the
beneficiary, the policyholder of a
life insurance policy or
annuity contract has the unrestricted right to designate an irrevocable beneficiary or change the beneficiary if not irrevocable.
The policyholder may, at any time, make an irrevocable designation of the beneficiary effective at once or at some time in the future. If the designation of the beneficiary is not explicitly irrevocable, the policyholder may change the beneficiary without the consent or knowledge of the previously designated beneficiary.
Subject to statutory requirements as to changing the beneficiary by will of the
policyholder, any act of the policyholder that unequivocally indicates an intention to make the change in beneficiaries is sufficient to effect it.
An insurer may prescribe formalities to be complied with for the change of beneficiaries which may be only for its own protection. The insurer discharges its obligation under the insurance policy if it pays a properly designated beneficiary, unless it has actual notice of either the assignment or an unequivocal act by the policyholder which indicates an intention to change beneficiaries. The insurer has actual notice if the policyholder has complied with its prescribed formalities.
Examples:
A holder of an individual
whole life insurance policy in
Wisconsin originally named his daughter as beneficiary. The policy contained no explicit restrictions on the right to change the beneficiary. After the policy had been in effect for six months, the policyholder decided to change the beneficiary to his oldest son. After the policyholder’s death, his daughter told the insurance company that she was entitled to receive the death benefits as the first beneficiary instead of the son. Is the daughter entitled to the benefits?
No. Under s. 632.48 (1) (b), Wis. Stat., if the designation of beneficiary is not explicitly irrevocable, the policyholder may change the beneficiary without the consent of the previously designated beneficiary. Assuming that the insured did not make a valid assignment of the right to the death benefits to the daughter after changing beneficiaries, the son is entitled to the benefits and not the daughter.
• A holder of an individual
term life insurance policy changed the beneficiary by replacingvthe name of his mother with his daughter’s name. The policyholder failed to notify the insurance company of the change as required by the policy. After the policyholder died, the insurance company paid the benefits to the mother who was the original beneficiary. The daughter claimed that the insurance company should have made payment to her under the policy. Was the insurance company correct in making payment to the original beneficiary?
Yes. Although the policyholder is free to change beneficiaries, under s. 632.48, Wis. Stat., the insurance company may require the policyholder to properly notify the company of any change of beneficiary. Since the policyholder failed to provide adequate notification under the terms of the policy, the insurance company discharged its obligation under the contract when it paid the properly designated beneficiary.
HOW TO BUY AN ANNUITY
Buying an annuity contract is a major financial decision which should be considered carefully. The prospective purchaser of an annuity contract should consider the offerings of as many different companies and agents as possible.
Contract Summary
In addition to receiving this Buyer's Guide, you must receive either a Preliminary Contract Summary or a Contract Summary prior to the time you pay the initial premium. If you did not receive a Contract Summary with this Buyer's Guide, you must receive one when the contract is delivered or you can ask for one now. You should review the contract summary thoroughly.
Accumulated values and surrender values under the contract are illustrated for various years on this summary. During the first few years, these values may be less than premiums paid. This is why an annuity contract should not be purchased for short term purposes.
Also illustrated are the yields on gross premiums at specified times. Yields take into account not only the interest credited under the contract, but also the effect of all charges. The yield on gross premiums is a figure you can use to compare annuity contracts. Be careful in comparing this yield with yields available on other investments. The tax treatment of annuity earnings is usually substantially different from that of earnings from other investments.
One reason for buying an annuity contract is to obtain an income, so you should review the life income figures.
Values and income figures may be shown on both a "guaranteed" and an "illustrated" basis. The guaranteed basis shows the minimum values and income which would be paid under the contract. The "illustrated" basis shows the values and income which would be paid if the current interest and benefit rates were to continue in effect. Since it is impossible to predict future interest and benefit rates, you will have to decide whether to rely on any illustrated basis values when making your purchase decision.
Other Points to Consider
Be certain you understand all charges that will be made and how they may reduce the value of the annuity.
Be certain you can afford the premium payments.
Check whether the annuity contract allows you to change the amount and frequency of your premium payments. Find out what happens if you stop paying premiums.
You may want to obtain and compare Contract Summaries for similar contracts from several companies. Comparing these should help you in your selection.
If you are buying an annuity contract for an Individual Retirement Account (IRA) or another tax deferred retirement program, make sure that you are eligible. Make sure that you understand any restrictions and tax implications connected with the program.
If you are shown a presentation which illustrates tax savings, be sure the assumptions, such as the tax bracket, apply in your case.
Some companies offer deposit fund arrangements with their life insurance policies or annuity contracts. These arrangements allow you to pay amounts in addition to your premiums that will be accumulated at interest in much the same way as under a deferred fixed annuity contract.
There are potential tax implications if an annuity contract is surrendered. Make sure you understand any tax penalties that would be imposed on surrender. If in doubt, consult your tax advisor.
Read the Contract
When you receive your new annuity contract read it carefully. Ask the agent or the company for an explanation of anything you do not understand.
If you have a specific complaint or cannot get the answers you need from the agent or company, please contact the Wisconsin Department of Insurance.
Group life insurance policies tend to be less expensive than those
purchased individually based on the fact that many group policies are
only effective while an employee within the group is employed at that
particular company.
To figure out a group rate, the insurance company will usually consider the following factors about a business:
- Number of employees within the group
- Average age of employees
- Ratio of female to male (based on the statistic that women tend to live longer than men)
- Number of smokers
- Risk-factors associated with the business
Based on the business risk, for example, a marketing firm would
probably have a lower group rate than a roofing company for equivalent
coverage.
Generally, group life insurance policies are "guaranteed issue,"
meaning that employees don't need to undergo a medical examination to
be eligible. If you are employed in the state of Wisconsin and has a serious medical condition, you may still
be a part of the group, as long your are still an active worker.
However, employees out on disability leave are not eligible for group
life insurance until they return to work, unless they went on leave
after the policy had been issued.
Learn more about other forms of life insurance
The interests of prospective purchasers of
life insurance must be safeguarded by providing persons with clear and unambiguous statements, explanations, and written information concerning the life insurance contracts offered to them. Section Ins 2.14,
Wisconsin Adm. Code, specifies that certain information must be disclosed to prospective purchasers. The purpose of the rule is to require insurers to deliver to purchasers of life insurance information which will improve the buyer’s ability to select the most appropriate plan of life insurance for his or her needs, improve the buyer’s understanding of the basic features of the policy which has been purchased or which is under consideration, and improve the ability of the buyer to evaluate the relative costs of similar plans of life insurance.
The insurer must provide a
Policy Summary upon delivery of the policy only if the insurer does not provide a basic illustration. The policy summary may describe or illustrate only the guaranteed elements of the policy. Dividends and other non guaranteed elements cannot be shown. The policy summary must show the annual premiums, guaranteed amount payable upon death, and guaranteed cash surrender values, for the first 20 policy years and at least one age from 60 through 65 or maturity, whichever is earlier.
The insurer shall provide to all prospective purchasers of life insurance policies subject to the rule a copy of the
Life Insurance Buyer’s Guide at the time the application is taken, except that insurers which do not market policies through an intermediary may provide the buyer’s guide at the time the policy is delivered provided they guarantee to the policyholder a 30-day right to return the policy for a full refund of premium.
Prior to beginning a life insurance sales presentation, an intermediary must inform a prospective purchaser that he or she is acting as a life insurance intermediary and inform the prospective purchaser of the full name of the insurer which the intermediary is representing. Where an intermediary is not involved, the insurer must identify its full name.
The requirements of the
Small Employer Health Insurance Law applies to group health insurance policies or certificates offered to small employers. It also applies to individual
health insurance policies that are offered through a small employer if 3 or more individual policies are sold to eligible employees and premiums are collected through an agreement with an employer.
A small employer insurer may exclude or limit coverage of specified conditions and services. The small employer insurer is allowed to exclude or limit only those conditions and services which are generally excluded from coverage or limited under the insurer’s other small group health benefit plans.
A fully insured small employer plan can exclude coverage for preexisting conditions for up to 12 months (18 months for a late enrollee) after an individual’s enrollment date. Any preexisting condition exclusion must be reduced by an individual’s prior creditable coverage. No preexisting condition exclusion may be applied to an individual who maintains continuous creditable coverage (without a break of 63 or more days) for 12 months (18 months for a late enrollee).
A preexisting condition exclusion is a limitation or exclusion of health benefits based on the fact that a physical or mental condition was present before the first day of coverage. A preexisting condition exclusion is limited to a physical or mental condition for which medical advice, diagnosis, care or treatment was recommended or received within the 6-month period ending on the enrollment date in a plan or policy.
During the preexisting condition exclusion period, the plan or issuer may not cover or pay for treatment of a medical condition based on the fact that the condition was present prior to an individual’s enrollment date under the new plan or policy. (The plan or issuer must, however, pay for any unrelated covered services or conditions that arise once coverage has begun.) The enrollment date is the first day of coverage, or if there is a waiting period before coverage takes effect, the first day of the waiting period.
Conditions that may not be considered “preexisting.”
• Pregnancy may not be considered a preexisting condition. In other words, if you are pregnant when you join your new employer group health plan, your pregnancy must be covered.
• Genetic information may not be considered a preexisting condition if there is no specific diagnosis of a current disease or medical problem related to the genetic test.
• Services provided for children adopted or placed for adoption before 18 years of age.
Employees who have satisfied a preexisting condition waiting period under a small employer’s plan will not have to satisfy another waiting period if they go to work for another small employer. They also cannot be denied coverage under their new employer’s plan because of their health or the health of their dependents.
Small employer plans must provide a special enrollment period:
• For individuals who become dependents by marriage, birth, or adoption. At that time, the employee or spouse may also elect coverage if not already covered.
• For employee/dependents who initially decline your plan coverage because they were covered through their spouse and then lose that coverage.
A small employer insurer may establish minimum participation and employer contribution rules and requirements on a group health benefit plan offered to a small employer. A small employer insurer that offers a group
health benefit plan to a small employer through a network plan may limit the small employers to those with eligible individuals who reside, live or work in the service area of the network plan.
The use of senior or retirement specific designations and titles by insurance producers in the marketing and sales of individual life insurance and annuities directed to seniors has increased nationwide. The use of titles, with words such as "certified," "accredited," "retirement planner," "senior adviser" or "senior consultant," implies special training or education for selling specialized products to seniors. However, this may not be true. The use of certain designations may mislead seniors who are considering purchasing life insurance or an annuity from an agent or company into thinking that special courses or exams were passed and signify expertise in seniors' financial matters, when, in fact, no such expertise exists. Some designations may have little or no educational requirements.
This bulletin applies to the marketing and sales of all life insurance and annuities, and requires the proper use of designations by producers.
Section Ins 2.16, Wis. Adm. Code, Advertisements of and deceptive practices in life insurance and annuities, provides for the regulation of the advertising of life insurance products and annuities. Insurance companies are responsible for all advertising for their products whether the advertisement is prepared by the company or the producer. The inclusion of designations in an advertisement is considered part of the advertising of the product.
Any producer who advertises himself or herself as holding special status due to training or advanced education must be able to provide documentation of expertise, such as a course syllabus and proof of successful completion of the course of study or training. No producer should hold himself or herself out through the use of designations or credentials as possessing special knowledge or expertise relating to retirement or the senior market, unless such designation or credential is supported by a documented program of study.
If producers misrepresent their level of expertise in marketing and sales activities, they will be subject to penalties under state law. An insurer who allows its producers to use misleading designations will also be subject to penalty under state law.
The following is a partial list of the recognized programs of study which have had courses approved for continuing education credit in Wisconsin.