Key Takeaways
- Michigan has specific regulations for credit life and credit disability insurance
- Accelerated death benefits must be offered on life insurance policies
- Viatical settlements are regulated under Michigan law
- Michigan prohibits genetic discrimination in life and health insurance
- STOLI (Stranger-Originated Life Insurance) is prohibited in Michigan
Special Insurance Topics in Michigan
Michigan regulates several special areas of life and health insurance that may appear on the licensing exam.
Credit Life and Credit Disability Insurance
Credit insurance pays off debt if the borrower dies or becomes disabled:
Credit Life Insurance
| Feature | Michigan Requirement |
|---|---|
| Coverage | Must not exceed debt amount |
| Beneficiary | Creditor |
| Premium | May be included in loan |
| Disclosure | Must disclose it's optional |
Credit Disability Insurance
| Feature | Michigan Requirement |
|---|---|
| Coverage | Monthly loan payments during disability |
| Waiting Period | As specified in policy |
| Duration | Until recovery or debt paid |
| Disclosure | Must disclose it's optional |
Key Consumer Protections
- Credit insurance must be disclosed as optional
- Cannot require as condition of loan
- Coverage cannot exceed debt
- Refund of premium if loan paid early
Exam Tip: Credit life and credit disability insurance must be disclosed as OPTIONAL. The borrower cannot be required to purchase it.
Accelerated Death Benefits
Michigan encourages life insurers to offer accelerated death benefits:
What Are Accelerated Benefits?
- Allow early payment of death benefit
- Available for terminal illness
- Reduces death benefit by amount paid
- Helps pay medical and living expenses
Michigan Requirements
| Aspect | Requirement |
|---|---|
| Availability | Commonly offered |
| Triggers | Terminal illness (typically 12-24 months) |
| Amount | Portion of death benefit |
| Cost | May reduce benefit or charge fee |
Viatical Settlements
Viatical settlements involve selling a life insurance policy for cash:
What Is a Viatical Settlement?
- Terminally ill person sells life policy
- Receives less than death benefit in cash
- Buyer becomes owner and beneficiary
- Buyer pays future premiums
Michigan Viatical Settlement Regulation
| Requirement | Detail |
|---|---|
| Licensing | Viatical providers must be licensed |
| Disclosure | Must disclose alternatives |
| Waiting Period | Policy ownership requirements may apply |
| Tax Information | Must inform of tax consequences |
Consumer Protections
- Rescission period after contract
- Must disclose impact on government benefits
- Cannot require waiver of rights
- Privacy protections for medical information
Genetic Discrimination Prohibition
Michigan prohibits genetic discrimination in insurance:
What Is Prohibited
| Action | Prohibition |
|---|---|
| Requiring Testing | Cannot require genetic testing |
| Using Results | Cannot use genetic test results in underwriting |
| Adverse Action | Cannot deny or rate based on genetics |
| Family History | Limited use of family history |
GINA Protections
- Federal GINA law provides additional protections
- Applies to health insurance primarily
- Prohibits using genetic information in employment
STOLI Prohibition
Stranger-Originated Life Insurance (STOLI) is prohibited in Michigan:
What Is STOLI?
- Life insurance arranged by someone without insurable interest
- Investor funds premium
- Investor becomes beneficiary
- Violates insurable interest requirement
Why It's Prohibited
- Violates public policy
- Creates moral hazard
- Treats life insurance as speculative investment
- May involve fraud
Must credit life insurance be disclosed as optional to borrowers in Michigan?
What triggers accelerated death benefits in Michigan?
What is STOLI and what is its status in Michigan?
Can Michigan health insurers require genetic testing as a condition of coverage?
You've completed this section
Continue exploring other exams