Credit Insurance

Aviation on Scheduled Flights

A rare provision in currently issued policies. This exclusion is for pilots and flight attendants.

Pregnancy

An excluded condition due to cost. A policy with these types of benefits would be considerably higher than one without such benefits.

Pre-Existing Condition

An impairment for which the insured has been treated prior to the effective date of insurance.

Monthly Outstanding Balance (MOB)

Balance is multiplied by the premium rate per $1000 of coverage which is then added to the monthly loan payment.

Closed-End Transaction

Borrowing for a specific period of time.

National Association of Insurance Commissioners (NAIC)

Group of Insurance Commissioners from various states promoting uniformity by developing model rules and acts to regulate insurance.

Credit Disability Insurance

Insurance on a debtor to provide payments due on a specific loan or credit transaction while the debtor is sick or disabled. Pays a limited number of monthly payments on a specific loan during term of coverage.

Credit Life Insurance

Insurance on the life of a debtor in connection with a specific loan or credit transaction. Pays off all or some of your loan if you die during the term of your coverage.

Any Occupation

Insured is unable to perform the duties of any occupation.

Own Occupation

Insured is unable to perform the duties of his/her particular trade or profession.

Events Covered With IU

Layoff, closing of employer's business, strike, unionized labor dispute, lockout

Types of Term Insurance

Level, Increasing, Decreasing

War and Acts of War

Losses incurred while the insured is engaged in this, will not be covered.

Proof of Insurance

Must be delivered to the insured debtor within 30 days of incurring the debt.

Decreasing Term

Provides a decreasing amount of death benefit plus a level premium for a specified period of time.

Level Term

Provides a level death benefit which would generally be used to satisfy needs such as burial and final expenses.

Credit Insurance Model Act

Requires insurance companies to file policy rates, premiums and forms with the Commissioner. Also states that the total amount insured cannot exceed the total indebtedness.

Term Life Insurance

Temporary death protection for a specified period of time.

Debtor

The borrower of money.

Net Payoff Coverage

The insurance covers the total amount owed at any given time.

Creditor

The lendor of money.

Indebtedness

The total amount owed to the creditor on a specific loan or credit transaction.

Gross Coverage

The total indebtedness owed under a closed end credit agreement.

Gross Indebtedness

The total remaining principal, insurance premiums, and scheduled interest charges on a retail installment contract. The total remaining financial obligation.

Post-Claim Underwriting

Determining whether an individual meets underwriting criteria after the receipt of a claim and voiding on coverage or denying the claim based upon that determination. This type of underwriting is unlawful in the State of Michigan.

Events Not Covered with IU

Disability, willful or criminal misconduct, seasonal employment, resignation, retirement, voluntary unemployment

Self-Inflicted Injury

A deliberate or intentional act to injure or hurt one's self.

Consumer Credit Protection Act (Truth-in-Lending Act)

A federal law that was designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.

Fair Credit Reporting Act (FCRA)

A federal law which regulates confidential, fair and accurate reporting of consumer information.

Probationary Period

A one time waiting period for sickness claims only.

Balloon Payment

A type of installment loan with a single, usually large payment due as the loan matures.

Private Mortgage Insurance (PMI)

A type of insurance that protects the lenders when a borrower defaults and subsequently forecloses on a home. Paid for by the borrower but protects the lender.

Consumer Reporting Agency

An agency providing information regarding credit history. They are prohibited from reporting bankruptcies older than 10 years, and all other adverse information over 7 years. Any violations is a fine up to $5,000 and/or imprisonment for up to one year.

Open-End Transaction

Borrower makes a minimum payment that is set by the lender. There is no fixed period of time for the loan to be re-paid. There is usually a credit limit or cap to the amount borrowed.

Joint Credit Life

Covering two individuals paying the benefit upon the first death.

Guaranteed Automobile Protection (GAP)

Covers the difference between the actual cash value of the auto and the outstanding loan balance at the time of loss.

Suicide Provision

If suicide occurs within the first two policy years, the face amount of the policy will not be paid. There will only be a refund of premium.

Prohibited Underwriting Practices-Age Restrictions

Insurers shall not refuse to insure, refuse to continue to insure, or limit the amount of insurance available to an individual because the person is age 70.

Credit Property Insurance

Not directly related to an event affecting your ability to repay your debt. Used to secure the loan if destroyed events like theft, accident or natural disasters occur during the term of coverage.

Types of Disability

Own occupation and any occupation

Credit Involuntary Unemployment Insurance

Pays for a specified number of monthly loan payments if you lose your job due to no fault of your own, such as a layoff, during the term of coverage.

Benefit Period

Period of time during which benefits will be paid following the elimination period.

Elimination Period

Period of time that the insured must be totally disabled before any benefit can be paid. This can be 30, 60, 90 or 180 days.

Term of Coverage

Should equal the term of the indebtedness but cannot extend more than 15 days beyond the maturity date of the indebtedness.

Truncated Disability Coverage

Coverage offered during a portion of the term of the loan. Benefits are paid only if the disability occurs during the term of coverage. Monthly benefit payments continue only until the end of the term of insurance.

Critical Period Disability Coverage

Coverage offered for the full term of the loan, but with the benefit limited to a specified number of monthly payments, or the remaining payments if less. This coverage is usually offered on loans over sixty months to decrease the borrower's total dollar outlay while offering essential protection.

Mortgage Guaranty

Insurance purchased to provide protection to the lender in case a borrower fails to meet required mortgage payments.

Installment Payments

paying a fixed amount for a fixed period of time.