Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) An individual credit
insurance policy or a certificate of group credit insurance shall be delivered to
the debtor within thirty (30) days after the debtor becomes insured in connection
with the indebtedness, as evidence of such insurance.
(b) Each individual policy or group certificate of
credit insurance delivered or issued for delivery in this State shall, in addition
to the other requirements of law, set forth:
(1)
the name and home office address of the insurer, and, on group certificates, an
identification of the master policy;
(2)
the identity of the insured debtor by name or any other reasonable alternative
method of identification approved by the Commissioner;
(3) the full amount of premium or identifiable
insurance charge to the debtor, separately for the credit life insurance and credit
disability insurance; except that in lieu of so stating the full amount of premium
or identifiable insurance charge, there may be set forth, separately for credit life
insurance and credit disability insurance, the rate of insurance premium or payment
per unit of coverage in case the indebtedness is a revolving loan or charge account
or in cases where the debtor obligates himself to pay the insurance premium or
payment periodically with the debt payments on the decreasing amount of the
insurance;
(4) a description of the
coverage including the amount and term thereof;
(5) any exceptions, reductions, limitations and
restrictions;
(6) a statement that the
benefits will be paid to the creditor to reduce or extinguish the indebtedness, and
if the policy provides coverage which may exceed the amount to which the creditor is
entitled under the contract of indebtedness, any such excess shall be paid to a
beneficiary other than the creditor, named by the debtor or to his estate;
and
(7) a statement that in the event
the indebtedness is discharged due to renewal or refinancing prior to the scheduled
maturity date, the insurance in force shall be terminated before any new insurance
may be issued in connection with the renewed or refinanced indebtedness, and in the
event the indebtedness is discharged due to payment prior to the scheduled maturity
date, the insurance in force shall be terminated, unless payments are made to the
debtor during the period of disability under the provisions of Section
2248.7(c)(2)(E).
(c) A policy, certificate of credit insurance or
notice of proposed insurance shall not contain provisions which would encourage
misrepresentation or which are unjust, unfair, inequitable, misleading, deceptive or
contrary to law or to the public policy of this State.
(1) A credit life insurance policy violates this
subsection if it contains any limitation or exclusion other than as provided in
California Administrative Code, Title 10, Chapter 5, Article 6.9.
(2) A credit disability insurance policy violates
this subsection if it:
(A) restricts coverage to
permanent disabilities where the debtor is in fact totally disabled for the period
required by the policy, although such disability may be of temporary
nature;
(B) defines disability as an
inability to perform any occupation. Disability may be defined as the inability to
perform any occupation for which the debtor is reasonably fitted by education,
training or experience after the period of total disability has existed for 18
consecutive months. During the first 18 months of disability, the definition must
relate the disability to the occupation of the debtor at the time such disability
occurred;
(C) restricts benefits to
those periods of total disability when the insured is under the regular and
continuing care of a physician, but this provision does not limit the right of the
insurer to require evidence of actual disability at reasonable intervals in order to
justify the continued payment of benefits;
(D) does not set forth clearly on the insured
debtor's policy or certificate in bold print or in some other prominent way, the
type of benefit payable, i.e., amount of monthly indemnity and a provision that the
daily indemnity will be calculated at the rate of 1/30 of the monthly
indemnity;
(E) does not provide that if
a debtor refinances or renews his indebtedness while disabled and insured, the
refinancing or renewal shall be disregarded for the purposes of applying elimination
periods and applying waiting periods and applying time limitations applicable to
pre-existing conditions to the extent such time limitations had expired prior to
such refinancing or renewal to the extent of the amount and term of the insured
indebtedness outstanding at the time of the renewal and refinancing of the debt or
if the indebtedness is prepaid by the debtor during any period of disability for
which benefits are payable, the disability coverage shall either continue in force
and the insurer shall make periodic payments directly to the debtor until such time
as the disability no longer exists or to the end of the term of insurance, whichever
first occurs, or provides for refund of the unearned premium for such period of
time;
(F) contains any other exclusion,
reduction or limitation except as provided in California Administrative Code, Title
10, Chapter 5, Article 6.9.
(3) A credit life insurance or credit disability
insurance policy violates this subsection if it:
(A) contains any exclusion because of age or other
eligibility requirement (including, but not limited to employment) unless such
requirement is contained in a written application for insurance signed by the
insured and such requirement is set forth clearly on the insured debtor's policy or
certificate in bold print or in some other prominent method, such as an appropriate
caption;
(B) provides an illusory
benefit because of a restrictive definition of total disability; for example, a
disability policy with a definition of "total disability" which conditions benefits
on ability to perform his occupation which is issued to a retired pensioner whose
income comes from Social Security, or to a home-maker with no separate wage or
salary, or to a member of the armed forces of the United States;
(C) provides an amount of insurance less than the
amount necessary to discharge the indebtedness, when it does not set forth clearly
such information on the insured debtor's policy or certificate in bold print or in
other prominent method.
(4) A
notice of proposed insurance violates this subsection if it does not comply with the
following:
(A) provides a blank space indicated as
the space for signature by the debtor;
(B) sets forth the name and home office address of
the insurer, the name or names of the debtor, the premium or amount of payment by
the debtor separately for credit life insurance and credit disability insurance, the
amount, term and a brief description of the coverage provided;
(C) refers exclusively to insurance coverage, and
shall be separate and apart from the loan, sales or other credit statement of
account, instrument or agreement, unless the information required by subparagraph
(B) above is prominently set forth therein.
(d) No statements made by a debtor shall be used
by an insurer as a basis for denying a claim unless such statement is contained in a
written application for insurance signed by the debtor, the form of which has been
filed with and approved by the Commissioner for use in connection with the policy
form in question.
(e) An application
must identify the insurer providing the coverage. An application signed by the
debtor is required whenever the policy contains an exclusion on account of age or
other eligibility requirement.
(f) By
accepting an application and issuing a policy, certificate or notice of proposed
insurance, the insurer waives any limitations in the policy which the application
revealed were breached on the date the application was made.
(g) If the insurer accepts premiums where the
applicant has correctly stated his age, insurance coverage shall be effective
regardless of age limitations or exclusions if a premium refund is not actually made
(finance instrument amended) within the 75-day period following the date the
application for insurance was signed by the debtor.
(h) A group credit insurance policy which provides
for payment of single premiums to the insurer shall provide that, in the event of
termination of such policy by the insurer or creditor, insurance coverage with
respect to any debtor insured under such policy, shall, unless the debt is
refinanced or prepaid, be continued for the entire period for which a single premium
has been paid by such debtor. 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 any debtor insured
under the policy by the insurer where practicable, otherwise by the creditor, unless
there is immediate replacement of the coverage by the same or another insurer. With
respect to debtors covered at the date of termination where notice is required,
coverage shall continue until notice is given as though the policy had not
terminated.
(i) Currently Approved
Policy Forms. Nothing in these regulations require the refiling of currently
approved policy forms, riders or any other approved forms. It is recognized that
certain provisions of these regulations will require the refiling of rates and the
reprinting of rate charts. Such currently approved forms shall be construed,
however, to be in compliance with all provisions of these regulations, or the
insurer shall immediately notify the Insurance Commissioner that the insurer will
not issue any such forms hereafter, and will not enroll or insure any new debtors on
such forms on and after the effective date of these regulations. New policy forms,
riders and applications filed for approval on and after the effective date of these
regulations, April 1, 1979, shall comply with all provisions of these
regulations.
1. Amendment of
subsection (b) and NOTE filed 4-14-94; operative 5-16-94. Submitted to OAL for
printing only pursuant to Government Code section
11343(a)(1)
(Register 94, No. 15).
Note: Authority cited: Section
779.21,
California Insurance Code. Reference: Sections
779.5 through
779.9 and
779.14,
California Insurance Code.
