Credit Insurance

premium mode/rates

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indebtedness

amount payable to a creditor by a debtor in connection with a credit transaction.

history of credit insurance

early 1900 bankers would lend money to individuals.arthur j morris developed democrazation of credit i e bank lends money to individula if good character shown and earning power to repay debt. 1910 norfolk virginia bank. morris: no mans debt should out live him. morris plan insurance society 1917 to 1941 grew steadily. until wwII declined until 1945. 1946 to present grew again creating, disability, property and casualty

termination of group credit insurance.

if policy is terminated for any reason insurance coverage with respect to any debtor insured under such policy shall be continued for the entire period for which the single premium has been pd. if debtor is convered by a group credit insurance policy providing for pmt of premiums to the insured on monthly basis. then the policy shall provide that if the policy terminated for any reason. notice to debtor not less than 30 days before the effective date of termination except where replacement of the coverage by the same or another insurer in same or greater amt takes place w/o lapse of coverage.

elgibility requiremements

individuals - must be under a specified age ie 70 yrs. required to sign a good health statement. application w health quesitons for larger amounts group - all debtors must be elgible. any person borrowing money, credit purchases etc

repayment for closed end tansaction

installment pmts - paying a fixed amt for a fixed time credit ins is reduced as time goes single pmt loans - fixed amt for fixed time. credit insurance increases as time goes. balloon pmt - simply an installmetn loan w 1 balloon payment when loan matures.

credit accident and health insurance

insurance on debtor to provide indemity for payments becoming due on a specific loan or other credit transaction while debtor is disabled

other underwriting criteria

questions are required to be on application not contain policy info. must be clear and unambiguous and be designed to be answered explicitly w yes or no. must be on objective matters not subjective such as medical condition. it's unlawful for insurer to engage in post claim underwriting.

Individual Credit Insurance

simply covering 1 person. Insurer issues 1 policy

credit life insurance note

the insurer can only insure their customer up to amount of insurance in force. the insurance must remain adequate for the needs of the debtor. term life insurance is usually temporary insurance used in credit life.

debtor

borrower of money or a purchaser or lessee of goods or services for which a payment is arranged

net payoff coverage

covers the net indebtedness of a loan which is the total amount owed at a given time. would cover net payoff amount remaining pmts minus any delinquent pmts and late fees.

coverage

credit life and accident and health cannot exceed the unpaid indebtedness due to the creditor. term of coverage should be equal the term of the indebtnesness but cannot extend more than 15 days beyond the maturity date of the indebtendess if indebtedness is pd off early, any premium refund may be pd or credited joint credit life can be made all policies must be approved by commisioner within 30 days

proof of insurance

cert of insurance must be delivered to the insured debtor within 30 days of incurring the debt

credit transaction 2 types

closed end transaction open end trans action

Group basis

covers a group of individuals and a master policy is issues certificates of insurance to each person.

open end credit trans action

credit extended can be increased at anytime. usually a limit or cap. ie credit cards and home equity line of credit (MOB - monthly outstanding balance - -balance is multipled by the premium rate per 1000 dollars of coverage which is then added to the monthly loan payment.

4 types of credit insurance

credit life - pays off all or some of loan should you pass credit disability - accident and health limited payments made credit involuntary unemployment - loss of income/no fault credit prperty ins. - protects personal property theft/accident/disaster

markets

credit uinons non profit organizations banks - large finance companies - for profit companies that offer credit ins on small appliances automobile dealers - dealers offer crdit inssurance on boats cars mobile homes recreation vehicles retailers - furniture electronics or appliances crdit card companies - some credit cards are investor owned and issue credit w/o going thru a bank *purpose of credit ins is to gaurantee repaument of their loans and earn commision

parties involved

creditors - companies who lend money or lease equipment also known as beneficiarys debtors - individuals who borrow money or lease from crditors insurance company - issuer of policy and assumes the risk of the insureds debt

post claim underwriting

determining whether an individual meets underwriting criteria after the receipt of claim and voiding coverage or denying the claim based upon determination. does not include determinations under preexisting conditions exclusion clauses. This type of underwriting is unlawful in Michigan.

credit life insurance

insurance on life of debtor pursuant to specific loan or other creditor

group insurance

larger group of people covered by one policy. group is subject to experience rating. each group is rated on its own merit. Community rating means all groups rated together. Group insurance premiums are generally less than individual premiums. group insurance is rented coverage. group ins policies are generally continuing in nature

credit insurance necessity or not

lenders cannot demand but can make a condition to loan. customer must have the option.

creditor

lendor of money or vendor or lessor of goods and services

what is credit insurance

life insurance - insure against death accident and health - insure there is money to pay medical bills in event of sickness or disability credit insurance is to indemnify the creditor (lendor) due to inability of the debtor to repay loan.

closed end transaction

most common - borrowing for specified time limit

certification of insurance

must include: name and address of home office of insurer amt of coverage and the premium to be pd by the debtor description of the coverage provided. statement indicating that excess coverage is payable to the debtors beneficiarys or estate

underwriting considerations

principal difference between indiv and group is the method of risk selection. individual requires certain factors needed to underwite. Group policies are usually required without any proof of insuraibility on the part of group participants

gross coverage vs net pay off coverage GPO

standard for computing credit life premiums. gross coverage is the total indebtedness owed under a closed end credit agreement. it is the total remaining principal. ins premium. and scheduled interest charges on a retail installment contract or lease it is total remaining financial obligation