Compliance with Alabama insurance laws in connection with preneed sales
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This bulletin governs requirements for preneed providers, their sales agents, and insurers when life insurance is used to fund preneed funeral or cemetery contracts in Alabama. It affects preneed providers holding certificates of authority, registered preneed sales agents/employees, and insurers authorized to write life insurance in Alabama.
No material clinical or coverage changes in this revision.
Life Insurance Funding — Compliance Criteria
Life insurance funding compliance criteria
Requirements and conditions when life insurance is used to fund preneed contracts:
Exception
- The life insurance product being offered is group life insurance.
- The agent's or employee's insurance-related activity is strictly limited and incidental to the preneed sale.
- The agent or employee is not paid a commission for such activity.
Policy Coding / Not Applicable Codes
| No procedure or diagnosis codes in this administrative bulletin. |
Agent and Provider Requirements
Producer licensing and appointment required for individual life sales
Agents or other employees who solicit, negotiate, or sell individual life insurance incident to a preneed contract must be properly licensed as insurance producers, must be properly appointed by the insurance company whose product is being offered, and must comply with Title 27, chapters 7 and 8A and implementing regulations. Appropriate licensing is a pre-condition to payment and receipt of commissions; business entities may hold an entity producer license but must designate at least one individually licensed employee responsible for compliance.
- Must hold individual producer license (or entity must designate an individually licensed employee responsible for compliance).
- Must be appointed by the insurance company whose product is offered.
- Licensing is a pre-condition to payment and receipt of commissions.
- Must comply with Ala. Code Tit. 27, chapters 7 and 8A and implementing regulations.
Exception: group life and strictly incidental activity (no license required)
An employee need not hold an insurance producer license only if (i) the life insurance product offered is group life insurance, (ii) the employee's insurance-related activity is strictly limited and incidental to the preneed sale, and (iii) the employee is not paid a commission for that activity.
- Product must be group life insurance.
- Activity must be strictly limited and incidental to the preneed sale.
- Employee must not be paid a commission for the insurance-related activity.
Key Definitions
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