Evidence of Insurance — Contents — Exclusions — Notice of Termination — Text — Dividends
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When credit life insurance is effected on a debtor, it shall be evidenced by an individual policy or, in the case of group insurance, by a certificate of group insurance, which policy or certificate shall be delivered to the debtor at the time the indebtedness is incurred or within thirty (30) days after the debtor becomes insured with respect to the indebtedness.
Each such individual policy or certificate of group insurance shall, in addition to other requirements of law, set forth:
The name and home office address of the insurer;
The identity of the debtor by name or otherwise and the debtor's age at issue or date of birth, if the age is material to claim payment, premium calculation or reserve calculation;
The amount and term of the coverage, if possible, or otherwise a clear description of the means of determining the amount and time of expiry;
The amount of premium or identifiable charge, if any, separately in connection with credit life insurance, unless, in the case of group insurance, the premium or identifiable charge has been disclosed to the debtor as provided in subsection (c). A copy of the document bearing the information required by this subdivision (b)(1)(D) shall be forwarded to the insurer or retained by the creditor in a manner that facilitates the good faith examination required in § 56-7-910(c);
The circumstances and formula under which refunds of premiums or identifiable charges are payable pursuant to § 56-7-909;
A description of the insurance coverage, including any exceptions, limitations or restrictions; and
A provision that:
The benefits shall be paid to the creditor to reduce or extinguish any unpaid indebtedness of the debtor to the creditor; and
Where the amount of insurance exceeds any unpaid indebtedness that excess shall be payable to the debtor or to the debtor's designated beneficiary, other than the creditor, or, if the debtor has designated none, to the estate of the debtor or under the provision of a facility of payment clause in the policy.
A certificate of group insurance is not required to contain the information described in subdivisions (b)(1)(B)-(D) if the information is otherwise provided in the disclosure statement provided to the debtor under the federal Truth-In-Lending Act (15 U.S.C. § 1601 et seq.).
If an individual policy or certificate of group insurance is not delivered to the debtor at the time the indebtedness is incurred, a copy of the application for the policy signed by the debtor and the creditor/agent or a notice of proposed group insurance shall be delivered to the debtor at the time the indebtedness is incurred. The application or notice shall set forth the following:
The name and home office address of the insurer;
The identity of the debtor, by name or otherwise;
The amounts or rates of premium or identifiable charge to the debtor, if any, separately in connection with credit life insurance and credit health and accident insurance;
The amount and term of the coverage provided, or description as provided in subdivision (b)(1)(C); and
A brief description of the coverage provided.
The application or notice of giving insurance is not required to contain the information described in subdivisions (c)(1)(B)-(D) if the information is provided in the disclosure statement provided to the debtor under the federal Truth-In-Lending Act (15 U.S.C. § 1601 et seq.).
If no identifiable charge is made to the debtor, the notice of proposed group insurance need not set forth the debtor's name. An application for an individual policy or notice of proposed group insurance shall include a statement that, if the insurance is declined by the insurer or otherwise does not become effective, any premium or identifiable charge will be refunded or credited to the debtor. The copy of the application for an individual policy and the notice of proposed group insurance shall refer exclusively to insurance coverage, and shall be separate and apart from the loan, sale or other credit statement of account, instrument or agreement, unless set forth in the policy in a separate provision with an appropriate and prominent caption on the face or reverse thereof in type at least equal in size to the type used for the other provisions. The insurer shall be responsible for establishment of procedures for delivery of the individual policy or certificate of group insurance to the debtor as provided in subsection (a). The application or notice of proposed group insurance shall provide that, upon acceptance by the insurer, the insurance coverage provided shall become effective as specified in § 56-7-907(b).
A credit life insurance policy may exclude from those persons eligible for insurance classes of debtors determined by age and provide for the cessation of insurance or reduction in the amount of insurance upon attainment of specified ages. In the event of misstatement of age, where age is material to the acceptance or rejection of the risk, the insurer may provide for rescission of the policy or certificate issued under the policy and a refund of all premiums paid for the policy by the debtor.
A group credit life insurance policy under which premiums are paid to the insurer monthly on outstanding balances shall contain a provision that, in the event of termination of the policy by the insurer or creditor, thirty-one (31) days' notice of the termination shall be given to each debtor insured under the policy by the creditor, unless there is immediate replacement of the coverage by the same or another insurer.
A group credit life insurance policy shall contain in substance the following provisions:
A provision that the policyholder is entitled to a grace period of thirty-one (31) days for the payment of any premium except the first, during which grace period the coverage shall continue in force, unless the policyholder has given the insurer written notice of termination in advance of the date of termination and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer for the payment of a pro rata premium for the time the policy was in force during the grace period;
A provision that the validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two (2) years from its date of issue; and that no statement made by or on behalf of any person insured under the policy relating to the person's age or insurability shall be used in contesting the validity of the insurance with respect to which the statement was made after the insurance has been in force prior to the contest for a period of two (2) years during the person's lifetime, unless it is contained in a written instrument and the written instrument is signed by the person. The instrument shall not be in a form that encourages misrepresentation or discourages disclosure of relevant facts;
A provision that a copy of the application of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by the persons insured shall be deemed representations and not warranties, and that no statement made by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to the person or to the person's beneficiary;
A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as to a part or all of the person's coverage; and
A provision specifying an equitable adjustment of premiums or of benefits or of both in the event the age of a person insured has been misstated, and the misstatement would have affected the premium or amount of benefit, the provision to contain a clear statement of the method of adjustment to be used.
Disability provisions in credit life insurance policies shall be so worded as to the payment of benefits that they are at least as favorable to the debtor as policies containing only disability provisions.
Individual policies of credit life insurance shall include, in addition to the provisions set forth in this section, the provisions of § 56-7-2307 that are not inconsistent with the coverage under the credit life policy.
No policy or certificate of credit life insurance shall be delivered or issued for delivery to any person in this state, unless the style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text, and unless every printed portion of the text of the policy and of any endorsements or attached papers are plainly printed in light-face type of a style in general use, the size of which shall be uniform and not less than ten (10) point with a lower case unspaced alphabet length not less than one hundred twenty (120) point.
As used in subdivision (i)(1), “text” includes all printed matter except the name and address of the insurer, name or title of the policy, a brief description of the coverage and the limitations or exclusions, if any, captions and subcaptions, and any overprint or statement of limitation of risk required by this or any other state to be more prominently displayed.
Dividends on participating individual policies of credit life insurance shall be payable to the individual insureds. Payment of the dividends may be deferred until such time as the policy is terminated. Dividends, or retrospective rate credits in the case of nonparticipating group policies, on group policies may be paid or credited to the creditor policyholder, subject to the restrictions contained in this subsection (j). The policies may provide that dividends or retrospective rate credits that are in excess of the contribution of the creditor may be paid or credited to the individual debtors or applied in some manner for the sole benefit of debtors generally. Insurers may be required to demonstrate to the commissioner that the dividends or retrospective rate credits are in fact equitably determined.
Dividends or retrospective rate credits shall be based on premiums earned and claims incurred. Payment of dividends or retrospective rate credits based on any other assumption shall not be allowed.
Nonparticipating individual policies of credit life insurance shall not be the subject of experience rating, and no agent or creditor shall receive retrospective commissions or other compensation, direct or indirect, based on the experience of policies sold through the agent or creditor or on the lives of the person's debtors, except as provided in this section.
For the purposes of §§ 56-4-204 and 56-4-205, retrospective rate credits shall be treated in the same manner as dividends in the computation of the tax on gross premiums.
When life insurance is requested by a creditor, the debtor shall have the option, upon notice to the creditor, of furnishing existing policies of insurance, or procuring and furnishing new policies of insurance, owned or controlled by the debtor and issued by any insurer authorized to transact an insurance business in this state for an amount not less than the indebtedness, and for the term and type of insurance coverage requested by the creditor. Any policy furnished by the debtor shall not be subject to §§ 56-7-903 — 56-7-912, unless procured through or administered by the creditor or an agent or broker designated by or associated with the creditor.
Insurers writing credit insurance shall be responsible for establishment of procedures by which creditors are furnished a sufficient number of printed notices informing their debtors of the option. Creditors shall prominently display the notices.