SB2237 95TH GENERAL ASSEMBLY

LRB095 18367 KBJ 44453 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB2237

Introduced 2/14/2008, by Sen. John J. Cullerton

SYNOPSIS AS INTRODUCED:

New Act

Creates the Insurable Interests Act. Provides that any individual of lawful age may take out an insurance contract upon himself for the benefit of any person. Provides that no person shall knowingly procure or cause to be procured any insurance contract upon another individual unless the benefits under the contract are payable to (i) the insured or his personal representative; or (ii) a person having an insurable interest in the insured at the time when the contract was made. With respect to trusts, the Act applies to trusts existing before, on, or after the Act's effective date. Contains other provisions. Effective immediately.

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Insurable Interests Act.

Section 5. Insurable interest. Any individual of lawful age may take out an insurance contract upon himself for the benefit of any person. No person shall knowingly procure or cause to be procured any insurance contract upon another individual unless the benefits under the contract are payable to (i) the insured or his personal representative; or (ii) a person having an insurable interest in the insured at the time the contract was made.

Section 10. Definitions. In this Act:

"Insurable interest" means:

(a) in the case of individuals related closely by blood or by law, or who would be, but for the individuals being of the same gender and a marriage between them not then recognized by this State, a substantial interest engendered by love and affection;

(b) in the case of other persons, a lawful and substantial economic interest in the life, health, and bodily safety of the insured. "Insurable interest" shall not include an interest that arises only upon the death, disability, or injury of the insured;

(c) an employer providing life, health, disability, retirement, or similar benefits to some or all of its employees or the employees of its affiliates, or their dependents or beneficiaries has an insurable interest in the lives of all its employees or the employees of its affiliates. The trustees of a trust established by an employer substantially for the benefit of the employer, or for the benefit of some or all of the employees in which such employer has an insurable interest, or the dependents or beneficiaries of such employees has the same insurable interest in the life of such employees as does the employer;

(d) in the case of a party to a contract or option for the purchase or sale, including a redemption of an interest in a business proprietorship, partnership, or firm or of shares of stock of a corporation or of an interest in such shares, the lawful and substantial economic interest required in subsection (b) of this Section shall be deemed to exist in each individual party to such contract or option and for the purpose of such contract or option only, in addition to any insurable interest that may otherwise exist as to the life of such individual;

(e) in the case of a trustee, the lawful and substantial economic interest required in subsection (b) of this Section shall be deemed to exist in (i) the individual insured who established the trust, (ii) each individual in whose life the owner of the trust for federal income tax purposes has an insurable interest, and (ii) each individual in whose life a beneficiary of a trust has an insurable interest;

(f) in the case of an organization described in paragraph (3), (4), (5), (9), or (10) of subsection (c) of Section 501 of the Internal Revenue Code, the lawful and substantial economic interest required in subsection (b) of this Section shall be deemed to exist where (i) the insured or proposed insured has either assigned all or part of his ownership rights in a policy of contract to such an organization or has executed a written consent to the issuance of a policy or contract to such organization and (ii) such organization is named in the policy or contract as owner or as beneficiary.

"Employee" includes any and all directors, officers, partners, employees, and retired employees and it shall include any other former employees, but only for the purpose of replacing existing life insurance policies that will be surrendered in exchange for new life insurance policies in an amount not exceeding the insurance being surrendered, except that the amount of new life insurance may exceed the insurance being surrendered to the extent the application of the cash surrender value from the old insurance as a premium under the new life insurance contract requires a larger amount of insurance to qualify as life insurance, and not be treated as a modified endowment contract for federal income tax purposes.

"Employer" includes corporations, limited liability companies or partnerships, statutory trusts, business trusts, and other business entities, including associations of employers and their affiliates.

Section 15. Application. This Act shall apply to all trusts existing before, on, or after its enactment, regardless of the effective date of the governing instrument under which the trust was created.

Section 99. Effective date. This Act takes effect upon becoming law.