State RegulationsNY specificDifficulty 1/5
A New York life insurer wants to identify applications that involve third-party premium financing. What does N.Y. Ins. Law §7812 permit the insurer to do?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under N.Y. Ins. Law §7812, without limiting the insurer's ability to assess the insurability of the 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. This lets New York insurers spot financed transactions that may later ripen into ownership changes, while leaving legitimate financed purchases undisturbed.
Why the other options are wrong
- A) Section 7812 addresses financing that uses the policy itself as collateral, not an applicant's unrelated bank borrowing.
- B) Spousal consent is not the subject of the §7812 inquiry; the statute targets lender financing secured by the policy.
- C) The statute says the opposite — insurers are expressly permitted to ask about premium financing arrangements on the application.
Memory hook
§7812 = the 'who is paying the premiums' question: lender financing secured by the policy.