California Governor Brown Signs SB 599 Into Law Requiring More
Options for Payment of Life Insurance Proceeds
October 5, 2011
California Governor Jerry Brown signed into law on October 2,
2011 legislation requiring life insurers to obtain written
declarations from beneficiaries selecting the method for receipt of
benefit payment. Previously, California law permitted life insurers
to limit beneficiaries’ option for receipt of payment to Retained
Asset Accounts ("RAA"). While RAAs are similar to checking accounts
in some respects, the life insurer retains control of the assets
and the account.
SB 599 emphasizes "lump sum" payments over payment through RAAs.
The new law defines "lump sum" as "a single payment made directly
to the beneficiary that satisfies all of the benefits owed to the
beneficiary."
As a result of Governor Brown signing SB 599, several changes
will be implemented when the law takes effect on January 1,
2012:
- Life insurers will be required to offer a range of options for
benefit payment unless payment is made as a "lump sum"
- Life insurers will be required to seek beneficiaries’ written
declarations on claim forms to select a payment option
- If no payment option is selected by a beneficiary, a RAA may be
used if significant disclosures have been made on the form.
- The disclosures must be "easy to understand" and appear in bold
font at least 12-point in size
The law contemplates additional regulations specifying
reasonable requirements for the form of the declarations and
disclosures to be promulgated by the Insurance Commissioner.
For questions regarding the information in this alert, please
contact any of the individuals listed above or your regular SNR
Denton attorney or professional.