Current through Register Vol. 56, No. 24, December 18, 2024
(a) Credit life
and credit accident and health insurance may be issued in connection with
open-end debts such as credit card transactions.
(b) The following requirements apply to the
amount of credit life and credit accident and health insurance issued in
connection with open-end debts:
1. Credit
life insurance shall cover the amount which the debtor is obligated to pay on
the date of death, subject to any policy maximum uniformly applied and any
statutory maximum. The amount of insurance shall include all credit drawn at
the date of death, regardless of whether it is recorded on the creditor's
books, and any accrued interest not yet paid.
2. The periodic payments for credit accident
and health insurance shall not be less than the creditor's minimum repayment
schedule based on the balance on the date of disability, subject to any policy
maximum uniformly applied. Payments shall continue while the debtor is disabled
until the account balance on the date of disability, and interest accrued
thereon, has been or would have been paid off.
3. Existing draw-downs of credit may or may
not be covered. The policy or certificate shall clearly indicate whether or not
existing draw-downs of credit are covered. A company may impose additional
underwriting to extend insurance to existing draw-downs of credit.
(c) The following requirements
apply for premiums or charges for credit life and credit accident and health
insurance issued in connection with open-end debts:
1. Credit life insurance premiums or charges
for a period shall be based on the coverage provided during that period.
Premiums shall therefore be calculated and charged in arrears, consistent with
the method by which finance charges are calculated. Generally, such charges
should be based on the average daily balance, beginning balance or ending
balance A premium may not be charged for coverage in a subsequent period based
upon the amount of debt in a previous period.
2. Premium rates for credit accident and
health insurance shall be calculated in a manner that is consistent with the
benefit provided.
3. The insurer
shall file premium rates for credit accident and health insurance in connection
with open-end debts that are appropriate for each schedule of minimum benefits
that the insurer intends to cover. If changes occur, the insurer shall amend
the certificate, or, if all rates are shown in the certificate, modify the
charge appropriately.
(d) Notwithstanding the provisions of
N.J.A.C. 11:4-41.7(a) or
any other provision of the New Jersey Administrative Code, a preexisting
condition exclusion may be applied to credit life insurance and credit accident
and health insurance issued in connection with open-end debts.
1. No preexisting condition exclusion shall
be applied to any amount of insurance for which the effective date of coverage
is within six months immediately following the date of submission by the
insured debtor of required evidence of insurability.
2. A preexisting condition exclusion may not
be more restrictive than a provision that excludes benefits for death or
disability due to conditions for which the insured debtor received medical
diagnosis or treatment within six months before the effective date of coverage
and from which death occurs or disability commences six months after the
effective date of coverage.
3. For
credit life insurance, a preexisting condition exclusion shall apply only if
and to the extent that the amount of credit life insurance for which the
effective date of coverage is within six months before the date of death
exceeds the greater of $ 1,000 or the outstanding balance in the billing period
in the month immediately prior to the date of the advance.
4. A preexisting condition exclusion may
apply separately to each new indebtedness incurred by the debtor and shall not
be reapplied to the total indebtedness each time a new indebtedness is
incurred. The effective date of coverage for each part of the insurance
attributable to a different advance or charge to the plan account is the date
on which the advance or charge occurs.
(e) With respect to insurance on credit card
or charge account balances solicited through the mail, the notice requirement
of N.J.S.A. 17B:29-6d may be satisfied by a tear-off notice affixed to the
application.
