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NORTH CAROLINA - Insurable Interest Laws

As of August 1, 2007
Most recent legislation changes:  October 1, 2004

§ 58-58-70. Insurable interest as between stockholders, partners, etc

   Where two or more persons have heretofore contracted or hereafter contract with one another for the purchase, at the death of one, by the survivor or survivors, of the stock, share or interest of the deceased in any corporation, partnership or business association of any kind, the person or persons making the contract of purchase shall be deemed to have, and are hereby declared to have, an insurable interest in the life or lives of the person or persons contracting to sell.

58-58-75. Insurable interest in life and physical ability of employee or agent

   (a) An employer, whether a partnership, joint venture, business trust, mutual association, corporation, any other form of business organization, or one or more individuals, or any religious, educational, or charitable corporation, institution or body, has an insurable interest in and the right to insure the physical ability or the life, or both the physical ability and the life, of an employee for the benefit of such employer. Any principal shall have a life insurable interest in and the right to insure the physical ability or the life, or both the physical ability and the life, of an agent for the benefit of such principal.

(b) An employee described in subsection (a) of this section shall be insured for the benefit of an employer described in subsection (a) of this section only if the employee receives written notification from the insurer of the existence of the coverage or that coverage will be purchased. The notice shall be provided to the employee in connection with the application for coverage or within 30 days after the effective date of the coverage and shall include a statement that the employer may maintain the life insurance coverage on the employee even after employment is terminated.

(c) For nonkey or nonmanagerial employees, the aggregate amount of coverage shall be reasonably related to the benefits provided to the employees in the aggregate.

(d) With respect to employer-provided pension and welfare plans, the life insurance coverage purchased to finance the plans may only cover the lives of those employees and retirees who, at the time their lives were first insured under the plan, either are participants, or would be eligible to participate, upon the satisfaction of age, service, or similar eligibility criteria in the plan.

§ 58-58-80. Insurable interest in life and physical ability of partner

   Any partner has an insurable interest in and the right to insure the physical ability or the life, or both the physical ability and the life, of any other partner or partners who are members of the same partnership for his benefit, either alone or jointly with another partner or partners of the same partnership. A partnership has a like insurable interest in and the right to insure the physical ability or the life, or both the physical ability and the life, of one or more partners of the partnership.

§ 58-58-85. Insurable interest in life of person covered by pension plan

   A trustee under a written document providing for a pension plan for payments of money or delivery of other benefits to be made to persons eligible to receive them under the terms and provisions of such written document shall be deemed to have and is hereby declared to have an insurable interest in the lives of any person or persons covered by the pension plan, to the extent that contracts or policies of insurance are in conformity with and in furtherance of the purposes of the pension plan.

§ 58-58-86. (Effective until October 1, 2007) Insurable interest of charitable organizations

   (a) If an organization described in section 501(c)(3) of the Internal Revenue Code, or an entity, purchases or receives by assignment, before, on, or after the effective date of this section, life insurance on an insured who consents in writing to the purchase or assignment, the organization or entity is deemed to have an insurable interest in the insured person's life.

(b) For the purposes of this section, an "entity" is any trust, business trust, partnership, corporation, limited liability company, or similar entity approved in writing by the insured as the beneficiary in, and owner of, a life insurance policy and annuity contract on the life of the insured subject to each of the following requirements:

   (1) The entity is formed for the purpose, in part, of generating funds for the benefit of one or more charitable organizations described in section 501(c)(3) of the Internal Revenue Code that are, prior to the time of the purchase, designated in writing by the consenting insured.

   (2) The payments to the entity under the annuity contracts must be reasonably anticipated to fund the premiums on the life insurance policies for the second and succeeding years.

   (3) Either (i) each benefited charitable organization described in section 501(c)(3) of the Internal Revenue Code that is designated in writing by the consenting insured provides an affidavit to the entity stating that the organization has been in existence for at least three years and has assets of at least five million dollars ($ 5,000,000) or (ii) the consenting insured provides an affidavit to the entity stating that the insured is an accredited investor as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended.

   (4) The consenting insured provides an affidavit to the entity stating that neither the consenting insured, any relative, as that term is defined in G.S. 39-23.1(11), of the consenting insured, nor any entity controlled by the consenting insured or any relative of the consenting insured other than a charitable organization described in section 501(c)(3) of the Internal Revenue Code, received any monetary remuneration or other consideration whatsoever in connection with the consenting insured's consent to purchase the combination of a life insurance policy and annuity contract.

   (5) Prior to the ownership or purchase of the combination of a life insurance policy and annuity contract on the consenting insured, each consenting insured and benefited organization described in section 501(c)(3) of the Internal Revenue Code is provided a written description of the minimum percentage or amount of the life insurance proceeds that is reasonably anticipated to be paid to the benefited charitable organization.

§ 58-58-86. (Effective after October 1, 2007) Insurable interest of charitable organizations

   (a) If an organization described in section 501(c)(3) of the Internal Revenue Code purchases or receives by assignment, before, on, or after the effective date of this section, life insurance on an insured who consents to the purchase or assignment, the organization is deemed to have an insurable interest in the insured person's life.

(b) Expired effective October 1, 2007, pursuant to Session Laws 2004-124, s. 32F.2.

This information does not constitute legal advice by the Insurance Barometer LLC and should not be relied upon as such. Every effort has been made to provide correct and accurate information but the reader should verify state laws prior to implementing an insurance program.