Current through Register Vol. 43, No. 39, September 26, 2024
(a) Multiple plans
of insurance. If a creditor makes available to consumers more than one plan of
credit life insurance, or more than one plan of credit accident and health
insurance, all appropriate consumers shall be informed of all available plans.
(b) Substitution. When a creditor
requires credit life insurance, credit accident and health insurance, or both,
as additional security for an indebtedness, the debtor shall be given the
option of furnishing the required amount of insurance through existing policies
of insurance, or procuring and furnishing the required coverage through any
insurer authorized to transact insurance business in this state. In such a
case, the debtor shall be informed by the creditor of the right to provide
alternative coverage before the transaction is completed.
(c) Evidence of coverage.
(1) All consumer credit insurance shall be
evidenced by an individual policy, or in the case of group insurance, by a
certificate of insurance. The individual policy or certificate of insurance
shall be delivered to the consumer in accordance with
K.S.A.
16a-4-105.
(2) Policy provisions.
(A) Each insurance policy or certificate used
in connection with a loan or credit transaction shall contain:
(i) the name and home office address of the
insurer;
(ii) the name or names of
the debtor;
(iii) the premium, or
amount of payment by the debtor, if any, for credit life insurance and for
credit accident and health insurance;
(iv) a statement specifying when the
insurance of the debtor will become effective and its termination conditions,
or the month, day, and year the insurance begins and terminates;
(v) any exceptions, limitations, or
restrictions; and
(vi) a statement
that the life of the debtor is insured under the policy and that any death
benefit paid by reason of death of the debtor shall be applied first to reduce
or extinguish the indebtedness.
(B) In addition to the requirements of
paragraph (A), each insurance policy issued in connection with a credit
transaction or loan shall set forth the kind or kinds of insurance included,
the coverages, and all the terms, exceptions, limitations, restrictions, and
conditions of the contract or contracts of insurance. Certificates shall
contain all provisions of the master policy applicable to the debtor.
(C) The requirements of paragraph
(2) are in addition to other requirements imposed by law concerning policy
forms and their approval.
(3) Settlement of claims. Separate credit
life insurance payments shall be made to the creditor, beneficiary, and to the
named second beneficiary, if any, as their interests may appear. If the policy
contains no provision for the designation of a second beneficiary, the
insurance shall go to the estate of the insured. Each payment made to the
creditor shall reduce the indebtedness.
(d) Termination of coverage.
(1) If a debtor is covered by a group
insurance policy on which a single premium is charged for insurance, the policy
shall provide that the group policy may terminate only with respect to debtors
who would otherwise become eligible for coverage after the date of termination,
and that insurance coverage with respect to any debtor insured under the policy
shall be continued for the entire period for which a single charge has been
made, subject to subsections (g) and (h).
(2) If a debtor covered by a group credit
insurance policy is charged for insurance on a monthly outstanding balance
basis, the policy shall provide that, if the policy is terminated, the insured
debtor shall be notified that coverage will terminate not less than 15 days
after mailing of the notice. If notice is not given to each insured debtor,
coverage shall continue for 30 days from the date of notice to the
policyholder, 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 notice to insured debtors required in this paragraph shall be given by the
insurer, or at the option of the insurer, by the creditor.
(e) Interest on premiums. If the
creditor adds identifiable insurance charges or premiums for consumer credit
insurance to the indebtedness, and any direct or indirect finance, carrying,
credit, or service charge is made to the consumer on the insurance charges or
premiums, the creditor shall remit and the insurer shall collect on a single
premium basis only.
(f) Renewal or
refinancing of indebtedness. If 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. In all cases of termination prior to
scheduled maturity, a refund shall be paid or credited to the debtor as
provided in K.A.R. 40-5-108. In any renewal or refinancing of indebtedness, the
effective date of the coverage of any policy provision shall be the first date
on which the debtor became insured under the policy covering the indebtedness
which was renewed or refinanced, at least in the amount of the indebtedness
outstanding at the time of renewal and refinancing of the debt.
(g) Voluntary prepayment of indebtedness. If
a debtor prepays indebtedness for a reason other than death or a lump sum
disability payment:
(1) Any credit life
insurance covering an indebtedness shall be terminated and an appropriate
refund shall be paid or credited to the debtor by the creditor at the time of
prepayment pursuant to K.A.R. 40-5-108; and
(2) any credit accident and health insurance
covering an indebtedness shall be terminated and an appropriate refund shall be
paid or credited to the debtor by the creditor at the time of prepayment. If
the indebtedness is prepaid by the debtor during any period of disability for
which benefits are payable, the disability coverage shall continue in force and
the insurer shall make periodic payments directly to the debtor until the
disability no longer exists or until the end of the term of insurance,
whichever occurs first.
(h) Involuntary prepayment of indebtedness.
If an indebtedness is prepaid by the proceeds of a credit life insurance policy
covering the debtor or by a lump sum payment of a disability claim under a
credit accident and health insurance policy covering the debtor, the insurer
shall ensure that the following refunds are made by the creditor at the time of
prepayment:
(1) In case of prepayment by the
proceeds of a credit life insurance policy, an appropriate refund under the
credit accident and health insurance coverage; and
(2) in the case of prepayment by a lump sum
disability claim, an appropriate refund under the credit life insurance
coverage.
