Insurable interest, underwriting, the application and policy delivery are covered in the national basics guides. This guide covers New York's rules on these topics: insurable interest and consent (Insurance Law 3205), insurance on minors (3207), Regulation 74 disclosure and illustrations, and life settlements (Article 78).

Insurable interest and consent (Ins. Law 3205)

• A person of lawful age may insure their own life for the benefit of anyone.
• When insuring someone else, the owner needs an insurable interest: for close relatives, a substantial interest based on love and affection; for others, a lawful and substantial economic interest in the insured's continued life (3205(a)(1)). A creditor, for example, has an interest up to the debt.
• Insurable interest must exist at the inception of the contract. It doesn't have to continue to the time of death (3205(b)(2)).
• Consent: the person whose life is insured must give written consent, except for group or family coverage, a spouse insuring the other spouse, and certain policies on minors (3205(c)).
• Employer-owned coverage: the employer notifies the employee in writing, gets written consent, and tells the employee they can have the coverage discontinued (3205(d)).
• Stranger-originated life insurance (STOLI) is prohibited (Ins. Law 7815).

Insurance on minors (Ins. Law 3207)

• A minor over 14 years and 6 months may buy and own a policy on their own life, with the beneficiary limited to close family (3207(a)).
• For a child under 14 1/2, total coverage is limited to the greater of $50,000 or 50% of the coverage on the person buying it, or 25% if the child is under 4 1/2 (3207(b)). Example: a parent with $300,000 of coverage can buy up to $75,000 on a child under 4 1/2.

Disclosure and illustrations (Ins. Law 3209; Regulation 74)

• The Buyer's Guide and preliminary information are given at or before application. The policy summary is given at delivery (Ins. Law 3209(b)(1); 11 NYCRR 53-2).
• On request, an insurer provides a policy summary for an in-force policy that never got one, and may charge a reasonable fee (3209(c)).
• Illustrations: guaranteed elements are shown first, and non-guaranteed elements are labeled as such (11 NYCRR 53-3.3). If no illustration was used in the sale, the producer certifies that on the insurer's form, and a basic illustration is delivered and signed with the policy. A revised illustration is signed no later than delivery (53-3.5).
• Backdating: a policy can't knowingly be dated more than six months before the application to lower the premium (Ins. Law 3208).

Life settlements (Insurance Law Article 78)

• Negotiating a life settlement requires a life settlement broker license (Ins. Law 2137). A producer with a life line licensed for at least one year is exempt from the broker exam and prelicensing. The broker represents only the owner and owes a fiduciary duty (7813(l)).
• The owner may rescind until 15 days after receiving the proceeds (7813(g)).
• Proceeds are sent within three business days after the provider confirms the ownership transfer (7811). The insurer answers a coverage verification request within 15 days (7813(b)).
• Contacts about the insured's health are limited to once every three months if life expectancy is more than a year, or monthly if a year or less (7813).
• Required disclosures include tax consequences, possible creditor claims, effects on public assistance and the rescission right (7811). Nobody may pay referral fees to the owner's doctor, lawyer, accountant, producer or other adviser (7814).
• Advertising can't promote buying a new policy mainly to settle it, or use words like "free" or "no cost" (7809).

Common exam traps

• Insurable interest at inception only.
• Written consent of the insured, with exceptions for group, family, spouses and minors.
• Minors: 14 1/2 to own your own policy; coverage limits of 50% or 25% (under 4 1/2), or $50,000 if greater.
• Buyer's Guide at or before application; policy summary at delivery.
• Life settlement rescission: 15 days after receiving the proceeds.