(a) If a life insurance policy contains long-term care benefits and permits policy loans or cash withdrawals, then access to those loans or withdrawals shall not be prohibited or limited due to the payment of long-term care benefits, except as provided in paragraphs (1) and (2). (1) Payment of an accelerated death benefit for long-term care shall result in no more than a pro rata reduction in the cash value of the life insurance policy. A reduction in cash value shall be proportionally equal to the percentage of death benefits accelerated to produce the accelerated death benefit payment. Future access to policy loans and cash withdrawals may be limited to the remaining cash value. (2) Notwithstanding paragraph (1), payment of an accelerated death benefit for long-term care may be considered a lien against the death benefit of the life insurance policy, and access to the cash value of the life insurance policy may be restricted to the excess of the cash value over the sum of outstanding policy loans and the lien. Future access to policy loans and cash withdrawals may also be limited to the excess of the cash value over the sum of outstanding policy loans and the lien. (3) This subdivision applies only to policies issued on or after January 1, 2021. (b) If payment of an accelerated death benefit for long-term care results in a pro rata reduction in the cash value of the life insurance policy, the payment may be applied toward repayment of a pro rata portion of outstanding policy loans. The amount of the loan repayment shall be proportionally equal to the percentage of death benefits accelerated to produce the accelerated death benefit payment. (c) At least 30 days before the expected first payment of an accelerated death benefit for long-term care, the insurer shall provide the policyholder or certificate holder with a statement that includes the information described in this subdivision. Alternatively, an insurer may provide the statement at the time of payment, but only if the insurer allows cancellation of the payment for at least 30 days after it is made. (1) The statement shall be dated and shall include all of the following: (A) An explanation of changes to the policy that have occurred as a result of the payment, or would occur as a result of the estimated payment, including, but not limited to, a prohibition or limitation of access to loans or cash withdrawals. (B) A numerical demonstration of the estimated effect of the payment on any applicable remaining policy values. The demonstration shall include, if applicable, impact to the death benefit, cash value or accumulation amount, policy loan value, outstanding policy loan amount, no-lapse guarantee, policy lien, premium payments or cost of insurance charges, and any other values impacted by the payment. (C) A notice stating: âWARNING: Payment of an accelerated death benefit for long-term care will reduce and may potentially eliminate your death benefit. Receipt of an accelerated death benefit for long-term care may be taxable and may also adversely affect your eligibility for Medicaid or other government entitlements. Please consult a financial advisor.â (2) If the statement is provided before the payment date, it shall also include all of the following: (A) The expected payment date. (B) An explanation that the policyholder or certificate holder may request payment before the expected payment date. (C) Notice that the policyholder or certificate holder may cancel the payment by contacting the insurer at the insurerâs address or telephone number at any time before the expected payment date. (3) If the statement is provided at the time of payment, it shall also include notice that the policyholder or certificate holder may cancel the payment by contacting the insurer at the insurerâs address or telephone number within the cancellation period and returning the payment. (d) The statement required by subdivision (c) is required only once per policyholder for an indi
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