(1) When credit
insurance is effected on a debtor it shall be evidenced by an individual policy
or, in the case of group insurance, which policy or certificate shall be
delivered to the debtor at the time the indebtedness is incurred or within
thirty days after the debtor becomes insured with respect to his
indebtedness.
(2) Each such
individual policy, or certificate of group insurance shall, in addition to
other requirements of law, set forth:
(a) the
name and home office address of the insurer, and
(b) the identity of the debtor by name or
otherwise and his age at issue or his date of birth, if the age is material to
claim payment, premium calculation or reserve calculation; and
(c) the amount and term of the coverage, if
possible, otherwise a clear description of the means of determining the amount
and time of expiry, and
(d) the
amount of premium or identifiable charge, if any, separately in connection with
credit life insurance and credit accident and health insurance unless in the
case of group insurance such premium or identifiable charge has been disclosed
to the debtor as hereinafter provided in paragraph (3). A copy of the document
bearing this information shall be forwarded to the insurer or retained by the
creditor in a matter which will facilitate the good faith examination required
in rule 0780-1-4-.07, and
(e) the
circumstances and formula under which refunds of premiums or identifiable
charges are payable pursuant to the provisions of Rule 0780-1-4-.07
and
(f) a description of the
insurance coverage including any exceptions, limitations or restrictions, and
in addition, shall state that the benefits shall be paid to the creditor to
reduce or extinguish any unpaid indebtedness to the creditor. Where the amount
of insurance exceeds any unpaid indebtedness that any such excess shall be
payable to the debtor or to his designated beneficiary, other than the
creditor, or, if he has designated none, to the estate of the debtor or under
the provision of a facility of payment clause.
(3) If said 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 such policy or a notice of proposed
group insurance, signed by the debtor and the creditor/agent shall be delivered
to the debtor at the time such indebtedness is incurred. Such application or
notice shall set forth the following:
(a) the
name and home office address of the insurer, and
(b) the identity of the debtor, by name or
otherwise, and
(c) the amounts or
rates of premium or identifiable charge to the debtor, if any, separately in
connection with credit life insurance and credit accident and health insurance,
and
(d) the amount and term of the
coverage provided, or description as provided in (2)(c) above, and
(e) a brief description of the coverage
provided.
However, where no identifiable charge is made to the debtor,
the notice of proposed group insurance need not be signed by the debtor nor set
forth his name. Such 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 pursuant to the provisions of
Rule 0780-1-4-.07. 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 therein 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 thereof. 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 paragraph (1). Said 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
paragraph (3) of Rule 0780-1-4-.05.
(4) No policy of credit accident and health
insurance may contain a provision excluding or denying a claim resulting from a
contingency caused by or contributed to by pre-existing conditions which
provision is more restrictive than the following:
"No insurance is provided hereunder if disability results
from a disease, injury or condition of health for which the insured was
hospitalized or received medical or surgical treatment or advise within the
lesser of six months at the original term of the coverage immediately preceding
the effective date of the coverage, if said death or disability occurs within
the lesser of six months or the original term of the coverage immediately
following such date, unless this policy (certificate) is issued in connection
with a refinanced indebtedness, in which case, the effective date of the
coverage shall be deemed to be the first date on which the insured became
insured with respect to the indebtedness which was refinanced."
No such provision shall apply to credit life
insurance.
This provision shall not be interpreted to preclude defense
of a claim because of misrepresentation of facts in any evidence of
insurability.
(5) Except as
set forth in paragraph (4), no policy of credit accident and health insurance
shall contain any provision which excludes or restricts liability in the event
of disability by reason of conditions other than pregnancy, intentionally
self-inflicted injuries, foreign travel or residence, travel in non-scheduled
aircraft, war, or special hazards to which a person in military service is
exposed in the line of duty and such other exclusions which have been shown to
the satisfaction of the Commissioner not to be contrary to the standards
prescribed in §§ 56-26-108 through 56-26-114.
Excepting in the case of insurance sold in connection with a
refinanced indebtedness, credit accident and health insurance shall not be
issued to a debtor who is not gainfully employed on the effective date of the
policy or certificate.
(6)
A credit insurance policy may exclude from those persons eligible for
insurance, classes 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 and a refund of all premiums paid by the debtor.
(7) A group credit 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 such policy by the
insurer or creditor, thirty-one days' notice of such 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.
(8) A group credit insurance policy shall
contain in substance the following provisions:
(a) A provision that the policyholder is
entitled to a grace period of thirty-one days for the payment of any premium
except the first, during which grace period the coverage shall continue in
force, unless the policyholder shall have 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 such grace period.
(b) 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 years from its date of issue; and that no statement made
by or on behalf of any person insured under the policy relating to his age or
insurability shall be used in contesting the validity of the insurance with
respect to which such statement was made after such insurance has been in force
prior to the contest for a period of two years during such person's lifetime,
unless it is contained in a written instrument and such written instrument is
signed by him. Such instrument shall not be in such form as to encourage
misrepresentation or discourage disclosure of relevant facts.
(c) 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 such person or to his
beneficiary.
(d) 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 his
coverage.
(e) 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 such misstatement
would have affected the premium or amount of benefit, such provision to contain
a clear statement of the method of adjustment to be used.
(9) If credit accident and health insurance
is included as a separate policy, the policy shall in addition, include such of
the provisions required by T.C.A. §
56-26-108, as are not inconsistent
with the coverage provided. 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 such
provisions.
(10) Individual
policies of credit life insurance shall include, in addition to the provisions
set forth herein, such of the provisions of T.C.A. § 56-7-301, as are not
inconsistent with the coverage.
(11) No policy or certificate of credit
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 is
plainly printed in light-face type of a style in general use, the size of which
shall be uniform and not less than ten point with a lower case unspaced
alphabet length not less than one hundred and twenty point (the, "text" shall
include all printed matter except the name and address of the insurer, name or
title of the policy, a brief description 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).
(12) Dividends on participating individual
policies of credit insurance shall be payable to the individual insureds.
Payment of such dividends may be deferred until such time as the policy is
terminated. Dividends (or retrospective rate credits in the case of
non-participating group policies) on group policies may be paid or credited to
the creditor policyholder, subject to the restrictions hereinafter contained.
Such policies may provide that dividends or retrospective rate credits which
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. Attention is called to T.C.A. §§
56-8-104(7),
56-8201, and 56-8-202, with respect to calculation of dividends and rate
credits. Insurers shall be prepared to demonstrate to the Commissioner that
such dividends or retrospective rate credits are in fact equitably determined.
Dividends or retrospective rate credits shall be based on
earned gross premiums and incurred claims as defined herein. Payment of
dividends or retrospective rate credits based on any other assumption shall not
be allowed.
Non-participating individual policies of credit 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 him or on the lives of his
debtors excepting as provided in this section.
For the purposes of T.C.A. §
56-4-204, retrospective rate
credits shall be treated in the same manner as dividends in the computation of
tax on gross premiums.
