Section 1812.406.

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(a) This title does not apply to credit disability insurance covering a key person, as hereinafter defined, which a creditor requires as a condition to making a loan of at least twenty-five thousand dollars ($25,000) to be used in the operation of a business in which the key person is employed or has an ownership interest.

For the purposes of this subdivision, a “key person” is a person who the creditor and the debtor or debtors mutually agree must be involved in the operation of the business to assure its success.

(b) This title does not apply to a loan or other credit transaction (including an open line of credit) of more than 10 years’ duration which is secured by a mortgage or deed of trust unless (1) the principal purpose of the loan or credit transaction is for the construction (other than initial construction), rehabilitation, or improvement (including “home improvement” as defined in Section 7151 of the Business and Professions Code) of real property consisting of four or fewer residential units, and (2) any document incident to the loan or credit transaction at the time the loan or extension of credit is made, or any course of dealing between the creditor and a contractor or material supplier assisting the borrower in obtaining the loan or extension of credit, would indicate that purpose.

(c) Subdivision (b) shall not apply to debtors who were entitled to receive notice from the creditor pursuant to subdivision (f) of Section 1812.402 on or after January 1, 1984, and prior to the effective date of the act which added this subdivision, unless the debtor receives written notice that the remedies provided in this title are revoked, the debtor is given an opportunity to cancel the coverage, and no claim has been made or notice provided as specified in Section 1812.401. If the debtor fails to cancel the insurance following receipt of the notice required under this subdivision, subdivision (b) shall apply to that policy upon payment by the debtor of the next installment of premium, whether to the insurer or to a creditor pursuant to a premium finance agreement.

(Amended by Stats. 1984, Ch. 1200, Sec. 3. Effective September 17, 1984.)


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