Vermont State Guidelines

Related Resource Links

• Legislation:

https://legislature.vermont.gov/statutes/section/08/103/03835

• Regulation:

https://dfr.vermont.gov/industry/insurance/producer-and-individual-licensing/apply-and-renew-your-license/life-settlement

• Regulatory Forms:

License Application

Broker Bond Form

Relevant State Departments of Insurance Contact Info

Vermont Department of Insurance –
89 Main Street
Montpelier, Vermont 05620-3101

Email the Division of Insurance
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TYPE OF LICENSE (LIFE SETTLEMENT/VIATICAL SETTLEMENT): LIFE SETTLEMENT

WHAT DOES THE STATE DEFINE AS CONTESTABLE?: 2 YEARS

WHAT IS THE REQUIRED HOLDING PERIOD?: 5 YEARS. See: 8 V.S.A. § 3844(a)(3).

WHEN DOES LICENSE NEED TO BE RENEWED?: 8 V.S.A. § 3836(a)(3). Licenses may be renewed from year to year on a date prescribed by the commissioner of the odd-numbered year next following the date of issuance upon payment of a biennial renewal fee of $ 400.00. Failure to pay the fee by the renewal date shall result in expiration of the license.

IS BROKER COMPENSATION DISCLOSURE REQUIRED?: YES. See: 8 V.S.A. § 3841(c)(4).

IS THERE A MINIMUM PAYMENT REQUIREMENT?: YES. CVR 21-020-047(Sec.8). Standards for Evaluation of Reasonable Payments.

A. In order to assure that viators receive a reasonable return for viaticating an insurance policy, the following shall be minimum payouts:

B. The expected death benefit is the death benefit provided under the terms of the policy being viaticated, assuming the death of the insured were to occur on the date the viatical settlement contract is signed.

C. The payment shall be increased by 100% of any net cash surrender value of the insurance at the time the viatical settlement contract is issued.

D. Payouts may be reduced by the minimum premium (including premiums payable for additional benefits retained at the option of the viator), if any, required to keep the contract in force for the duration of the viator’s remaining life expectancy. Other than this allowable reduction in payout, there shall be no other retention for expenses or broker’s fees.

At the time of settlement, the viatical settlement provider shall place in trust a sum equal to the amount the payout was reduced for future premiums. Sums placed in trust under this section shall only be reduced by the viatical settlement provider upon payment of policy premiums as they come due. If the viator dies with a sum held in trust under this section, the sum remaining in trust shall become the property of the viatical settlement provider.

E. If the viatical settlement provider becomes insolvent or is the subject of a bankruptcy or other insolvency proceeding during the life of the viator whose policy had riders retained, the viatical settlement provider shall notify the viator and other insureds of the insolvency or initiation of insolvency proceedings. Persons with an interest in the continuation of riders retained may pay any premiums required to keep riders retained in force.

F. In computing the minimum percentage of expected death benefit (net of loans and cash surrender value) the death benefit value of any accidental death benefit rider shall not be included. There shall be no minimum percentage
payment required for the transfer of an accidental death benefit rider to the viatical settlement company.

G. Life expectancy shall be determined by a physician selected by the viator, on the basis of medical records. The physician selected will send life expectancy information to the viatical settlement provider. If the viatical settlement
provider disagrees with the life expectancy estimate of the physician selected by the viator, the viator will select a second physician to make an estimate of life expectancy, based on medical records. The second physician’s decision shall be final.

WHEN DOES THE MONEY NEED TO BE IN ESCROW?: 8 V.S.A. § 3843(d). The life settlement provider shall instruct the policy owner to send the executed documents required to effect the change in ownership, assignment, or change in beneficiary directly to an independent escrow agent. Within three business days after the date the escrow agent receives the document (or from the date the life settlement provider receives the documents, if the policy owner erroneously provides the documents directly to the provider), the provider shall pay or transfer the proceeds of the life settlement into an escrow or trust account maintained in a state- or federally chartered financial institution whose deposits are insured by the Federal Deposit Insurance Corporation. Upon payment of the settlement proceeds into the escrow account, the escrow agent shall deliver the original change in ownership, assignment, or change in beneficiary forms to the life settlement provider or related provider trust or other designated representative of the life settlement
provider. Upon the escrow agent’s receipt of the acknowledgment of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurance company, the escrow agent shall pay the settlement proceeds to the policy owner.

IS THERE A NOTICE REQUIREMENT TO THE INSURED AFTER THE SALE?: YES. 8 V.S.A. § 3841(d). If the life settlement provider transfers ownership or changes the beneficiary of the insurance policy, the provider shall communicate in writing the change in ownership or beneficiary to the insured within 20 days after the change.

IS THERE A NOTICE REQUIREMENT TO THE CARRIER BEFORE/AFTER THE SALE?: YES.

BEFORE (8 V.S.A. § 3842): Thirty days prior to the execution of a life settlement contract or the execution or other affirmation of an agreement or arrangement to enter into a life settlement contract, a life settlement provider shall provide notice to the insurer that issued or has assumed the policy, provided the contract, agreement or arrangement is executed or otherwise affirmed prior to, or during the first five years after issuance of a policy. The notice shall contain information identifying the policy and the policy owner, if applicable, and a copy of the proposed life settlement contract.

AFTER (8 V.S.A. § 3843(a)(2): Within 20 days after a policy owner executes documents necessary to transfer any rights under an insurance policy or within 20 days of entering any agreement, option, promise, or any other form of
understanding, expressed or implied, to subject the policy to a life settlement contract, the life settlement provider shall give written notice to the insurer that issued that insurance policy that the policy has or will become a policy subject to a life settlement contract. The notice shall be accompanied by the documents required by subdivision (3) of this subsection.

WHAT IS THE RESCISSION PERIOD?: 8 V.S.A. § 3843(c). All life settlement contracts entered into in this state shall provide the policy owner with an absolute right to rescind the contract before 30 calendar days after the date upon which the life settlement contract is executed by all parties. Rescission by the policy owner may be conditioned upon the policy owner’s both giving notice and repaying to the life settlement provider within the rescission period all proceeds of the settlement and any premiums, loans, and loan interest paid by or on behalf of the life settlement provider in connection with or as a consequence of the life settlement. If the insured dies during the rescission period, the life settlement contract shall be deemed to have been rescinded, subject to repayment to the life settlement provider or purchaser of all life settlement proceeds and any premiums, loans, and loan interest that have been paid by the life settlement provider or purchaser, which shall be paid within 60 calendar days of the death of the insured. In the event of any rescission, if the life settlement provider has paid commissions or other compensation to a life settlement broker in connection with the rescinded transaction, the life settlement broker shall refund all such commissions and compensation to the life settlement provider within five business days following receipt of written demand from the life settlement provider, which demand shall be accompanied by either the policy owner’s notice of rescission if rescinded at the election of the policy owner or notice of the death of the insured if rescinded by reason of the death of the insured within the applicable rescission period.

IS THERE A VOC REQUIREMENT (OWN/STATE/NAIC FORM)?: YES – OWN – State Approved. 8 V.S.A. § 3843(a)(3).