Section 2: Credit Life & Disability Insurance

Credit Disability Insurance

- Pays a person's debt(s) in the event of the disability of that person. Benefits can be paid on a term basis (pay off the entire debt) or as a disability benefit (pay the monthly payment). ______ ________ _________ can be an individual contract or a group contract.

Credit Life Insurance

- Pays off a person's specific loan or credit transaction in the event of the death of that person. ______ _____ __________ can be an individual contract or a group contract.

Licensed

Credit life and disability insurance can only be written by authorized insurers, and must be sold by _______ agents.

Advertise

Insurers and agents cannot _________ the Association to solicit insurance business.

Purpose

The _______ of this is to protect policyholders and claimants from insurers' failure to perform contractual obligations due to impairment or insolvency. Provides coverage for life, disability, and annuity contracts issued by authorized insurers.

Scope

These rules apply to all life and disability insurance issued in connection with loans or other credit transactions, but do not apply to policies issued in connection with loans or credit transactions of more than 15 years duration. They do not apply to isolated transactions where the issuance of insurance on the part of the insurer is not related to an agreement or plan for insuring debtors of a creditor. This means that they are in ______.

Payment

When a life or disability insurer makes a _______ in accordance with a policy to the person designated to receive the benefit, it is fully discharged from claims, unless (prior to making the ______) the insurer receives notice at its home office that some other person claims entitlement to _______ under the policy.

Debtor

_______ is a borrower of money or purchaser of goods paid for with a credit transaction.

Creditor

_______ is a lender of money or vendor who arranges a credit transaction on goods sold. Also any successor to any of these transactions (someone who assumes an existing debt).

Indebtedness

_________ is the total amount payable by the debtor to the creditor in a loan or credit transaction.

Board of Directors

5-9 members; members are selected by insurers with approval of Commissioner. Majority of members from the _____ __ ______ must be Idaho domestic insurers.

Membership

All authorized life, disability, and/or annuity insurers are members of the organization. All members pay a two-part assessment. All insurers pay an assessment reflecting administrative costs general expenses (Class A) and an assessment reflecting the cost of claims (Class B for domestic insurers, Class C for foreign and alien insurers). Insurers can be relieved of their obligation to pay assessment if the Association determines that the assessment would endanger the insurers' ability to meet their contractual obligations. Total of assessments for a calendar year cannot exceed 2% of the premiums collected by the insurer in Idaho the previous year. This is all covered under ___________.

Assignment

Any life or disability policy that allows the owner or insured to change the beneficiary may allow ___________ by pledge or transfer of title. This ___________ must be executed by the owner and delivered to the insurer. This entitles the insurer to deal with the assignee until the ___________ is terminated. Group life insurance policies can also be _______.

Term

Coverage begins on the date of indebtedness and cannot extend more than 15 years beyond the scheduled maturity date of the debt.

Benefits

Credit life ______ cannot exceed the amount of debt. Credit disability ______ cannot exceed the total of all installments. Each payment cannot exceed the original debt divided by the number of installments.

Choice of Insurer

If a person is required to purchase credit life and/or credit disability coverage for a credit transaction, that person can provide the coverage through existing insurance, or can procure insurance on his/her own. A creditor cannot require borrowers to use a particular insurer.

Not Covered

Non-guaranteed variable life/annuity returns; portions of policies under which risk is borne by the policyholder; reinsurance contracts; unallocated annuity contracts; and, contracts issued by fraternals, mutual benefit associations, reciprocals, hospital and medical service corporations, HMOs, or self-funded health care plans. These are ___ _______.