When you apply for an insurance license, you may be surprised to find a question about your child support payments in the Background Questions. For those of you unfamiliar with the licensing process, most state insurance departments base their license applications on the NAIC Uniform Application. This application includes eight questions – okay, some of them are multi-parters – designed to identify individuals whose applications may need closer scrutiny by the Department of Insurance (DOI) before the license application is approved or rejected.
It’s pretty obvious why the regulators want to know about criminal convictions, administrative actions from other regulators, fraud, etc., but child support? Why do they care about that?
When Child Support Becomes an Issue
First, let’s look at the exact wording of the background question:
7. Do you have a child support obligation in arrearage?
If you answer yes,
a) by how many months are you in arrearage?
b) are you currently subject to and in compliance with any repayment agreement [including wage garnishment]?
c) are you the subject of a child support-related subpoena/warrant?
As you can see, the requirement to pay child support isn’t an issue … until you fall behind on those payments. That’s arrearage. You only have to answer “yes” to this background question while you’re behind.
Why the DOI Cares About Child Support
Your child support arrangements may seem to be a strictly personal matter, having nothing to do with your ability to serve your insurance clients. But the DOI doesn’t see it that way.
First, if you’re under a court order to pay child support, it’s against the law to withhold those payments – for any reason. State insurance departments frown on criminal activity, regardless of its nature. If the issue escalates to the point where the court issues a subpoena or warrant, that’s even more serious.
Second, an insurance professional who’s under financial strain may be tempted to commit fraud or otherwise misuse the monies entrusted to them by their clients. That’s why there are also questions about corporate bankruptcies and delinquent tax obligations.
Lastly, trust is the foundation of the insurance industry. After all, we’re not selling a physical product like shoes or automobiles, or even an experience like a concert or vacation. We’re selling legal contracts – pieces of paper backed by a promise that we will be there for policyholders with financial assistance at what may be one of the worst times of their lives. It’s our industry’s high standards for ethics and professional conduct that make that kind of trust possible. Not fulfilling your legal and ethical responsibilities doesn’t really line up with that standard.
What to Do If You Are in Arrearage
To begin with, you always want to answer the Background Questions truthfully. In most cases, being in arrearage will not prevent the issue of your license. But misrepresenting your situation (a.k.a. LYING) on your application will cause no end of problems!
If you answer “yes,” you’ll need to provide documents that show you’re making an effort to catch up on your child support payments. This may include proof of your payments for the past three (3) months or a copy of your court-approved repayment agreement/plan.
If you’re failing to comply with a child support subpoena or warrant, the DOI can deny your license application or even administratively terminate your existing license. Both of these responses could constitute an administrative action, which you must report to the insurance departments in ALL states where you hold a license.
Finally, if you didn’t need to answer “yes” at the time you applied for your license, but later fell behind on your child support payments, you need to report this fact to the insurance departments in all the states where you hold a license within thirty (30) days. Again, failing to do so may result in administrative actions.
The Last Word
State regulators take child support seriously, as hopefully, you do. Everyone understands that times can be tough; but remember, not meeting your child support obligations not only hurts your kids but can also jeopardize your ability to earn a living as an insurance agent.
This article previously appeared on Elaine Nance’s LinkedIn page.
Want to learn more about the other background questions that appear on individual license applications?
Check out these helpful videos from ILSA:
- ILSA Explains: Background Questions
- ILSA Explains: Administrative Actions (ADD LINK AFTER 11/17 PUBLICATION)
- How to Avoid Administrative Actions
- Compliance Myths BUSTED! Reporting Criminal History
- WOW! ILSA’s Word of the Week – Legal Review
- How ILSA Can Help with Administrative Action Reporting