§ 7812. Life insurance applications. (a) Without limiting the ability
of an insurer to assess the insurability of a policy applicant and to
determine whether or not to issue the policy, and in addition to other
questions an insurer may lawfully pose to a life insurance applicant,
insurers may inquire in the application for insurance whether the
proposed owner intends to pay premiums with the assistance of financing
from a lender that will use the policy as collateral to support the
financing.

(b) The insurer may include the following notice to the applicant and
the insured, or other notice acceptable to the superintendent, on the
application or as an amendment thereto: "If you enter into a loan
arrangement where the policy is used as collateral, and the policy
changes ownership at some point in the future in satisfaction of the
loan, then the following may be true:

(1) a change of ownership may lead to a person unknown to you owning
an interest in the insured's life;

(2) a change of ownership may limit your ability to purchase insurance
in the future on the insured's life because there is a limit to how much
coverage insurers will issue on one life;

(3) if ownership of the life insurance policy changes, and you wish to
obtain more insurance coverage on the insured's life in the future, the
insured's higher issue age, a change in health status, and/or other
factors may reduce the ability to obtain coverage and/or may result in
significantly higher premiums; and

(4) you should consult a professional advisor, since a change in
ownership in satisfaction of the loan may result in tax consequences to
the owner."