Ala. Admin. Code r. 482-1-117-.16 - Rights And Treatment Of Debtors

(1) Termination of Group Consumer Credit Insurance Policy.

(a) If a debtor is covered by a group consumer credit insurance policy providing for the payment of single premiums to the insurer, or any other premium payment method which prepays coverage beyond one month, then provision shall be made by the insurer that in the event of termination of the policy without replacement of coverage, insurance coverage with respect to any debtor insured under the policy shall be continued for the entire period for which the premium has been paid or the premium shall be refunded as provided herein after at least thirty (30) days' notice of termination.

(b) If a debtor is covered by a group consumer credit insurance policy providing for the payment of premiums to the insurer on a monthly basis, then the policy shall provide that, in the event of termination of the policy, termination notice shall be given to the insured debtor at least thirty (30) days prior to the effective date of termination except where replacement of the coverage by the same or another insurer in the same or greater amount takes place without lapse of coverage. The insurer shall provide or cause to be provided this required information to the debtor.

(2) Remittance of Premiums. If the creditor adds identifiable insurance charges or premiums for consumer credit insurance to the debt, and any direct or indirect finance, carrying, credit or service charge is made to the debtor on the insurance charges or premiums, the creditor must remit and the insurer shall collect the premium within sixty (60) days after it is added to the debt; provided that any commissions or other compensation payable to the creditor or its licensed insurance agent employee or affiliate may be retained and shall have been deemed to have been remitted to the insurer.

(3) Refinancing of the Debt. If the debt is refinanced prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the refinanced debt. In all cases of termination prior to scheduled maturity, a refund of all unearned premium or unearned insurance charges paid by the debtor shall be paid or credited to the debtor as provided in Rule 482-1-117-.11. In any refinancing of the debt, the effective date of the coverage as respects any policy provision shall be deemed to be the first date on which the debtor became insured under the policy with respect to the original debt which was refinanced, at least to the extent of the amount and remaining term of the insurance in effect at the time of refinancing of the debt.

(4) Maximum Aggregate Provisions. A provision in an individual policy or group certificate that sets a maximum limit on total claim payments must apply only to that individual policy or group certificate.

(5) Prepayment of Debt. If a debtor prepays the debt in full, then any consumer credit insurance covering the debt shall be terminated and an appropriate refund of the consumer credit insurance premium shall be paid or credited to the debtor in accordance with Rule 482-1-117-.11. However, if the prepayment is a result of death or any other lump sum consumer credit insurance payment, no refund shall be required for the coverage under which the lump sum was paid. If a claim under credit disability coverage is in progress at the time of prepayment, the amount of refund may be determined as if the prepayment did not occur until the payment of benefits terminates. No refund need be paid during any period of disability for which credit disability benefits are payable. A refund shall be computed as if prepayment occurred at the end of the disability period.

(6) Age Restrictions.

(a) The provisions of this Paragraph (6) apply whenever a debtor's age information is correctly stated on an application for insurance, and the insurer has received a premium for coverage with respect to which the debtor is ineligible due to an age restriction or for a period beyond which coverage has terminated due to an age restriction.

(b) The age restriction shall not be used as a basis for denying a claim for a loss that has occurred prior to the time that the insurer has notified the debtor in accordance with Subparagraphs (c), (d) or (e) of this Paragraph (6).

(c) To cancel coverage due to an age restriction making a debtor ineligible for coverage if the debtor has attained a specified age at the time the indebtedness is incurred or will attain a specified age by the scheduled maturity date of the indebtedness or by the end of the term of insurance, the insurer must so notify the debtor within ninety (90) days following the effective date of the coverage and promptly refund the premium.

(e) To reduce the term of insurance coverage, through endorsement of the insurance contract, due to an age restriction making a debtor ineligible for coverage if the debtor will attain a specified age by the end of the term of insurance, the insurer must so notify the debtor within ninety (90) days following the effective date of the coverage and promptly refund the difference in premium between the amount originally charged and the appropriate amount for the reduced insurance term.

(f) To cancel coverage for a period with respect to which a premium has been received despite an age restriction providing that coverage will terminate when the debtor attains a specified age, the insurer must so notify the debtor within ninety (90) days following the date that the premium was received and promptly refund the premium.

Author: Reyn Norman, Associate Counsel

Notes

Ala. Admin. Code r. 482-1-117-.16

New Rule: October 14, 1999; effective November 1, 1999. Filed for codification in the Alabama Administrative Code by the Department of Insurance on January 17, 2003, pursuant to the Code of Ala. 1975, § 27-7-43.

Statutory Authority: Code of Ala. 1975, § 27-2-17.