Ala. Admin. Code r. 482-1-111-.03

Current through Register Vol. 43, No. 1, October 31, 2024

Section 482-1-111-.03 - Definitions

The following definitions shall apply for purposes of this chapter:

(a) ACTUAL CASH VALUE. In a GAP insurance policy, this term shall have the same meaning as under the physical damage insurance policy covering the leased property or collateral, but may be reduced by all or part of any applicable deductible.

(b) BUSINESS ENTITY. As defined in Section 27-7-1, Code of Ala. 1975.

(c) COMMISSIONS. Any valuable consideration paid with respect to the sale of insurance, the amount of which is based on the amount of insurance written or the amount of premium written or earned.

(d) CREDIT DISABILITY INSURANCE. Insurance on a debtor or debtors, in connection with a specific credit transaction, to provide indemnity for payments or debt becoming due on that credit transaction, in whole or in part, while the debtor is disabled as defined in the policy, and which precludes debtor selection of primary beneficiary. The terms "credit accident and health insurance," "credit health and accident insurance" and "credit disability insurance" have the same meaning. "Mortgage disability insurance" shall also be considered "credit disability insurance."

(e) CREDIT INSURANCE. Shall include "Credit Life Insurance", "Credit Disability Insurance" and "Credit Property and Casualty Insurance" as defined in this section.

(f) CREDIT LIFE INSURANCE. Insurance on a debtor or debtors, in connection with a specific credit transaction, to provide for satisfaction of that credit obligation, in whole or in part, upon the death of an insured debtor, and which precludes debtor selection as to primary beneficiary. "Mortgage life insurance" shall also be considered "credit life insurance."

(g) CREDIT PROPERTY AND CASUALTY INSURANCE. Any of the following forms of insurance sold to a debtor or debtors in connection with a specific credit transaction that is limited to partially or wholly extinguishing that credit obligation: automobile physical damage insurance (whether single interest or dual interest coverage), creditor-placed insurance (also known as forced-placed insurance), mortgage guaranty insurance, GAP insurance, family and medical leave insurance, nonfiling insurance, physical damage coverage on household goods, and involuntary unemployment insurance. Credit property and casualty insurance may be issued at or after contract inception.

(h) CREDIT TRANSACTION. Any transaction by the terms of which the repayment of money loaned or loan commitment made, or payment for goods, services or properties sold or leased, is to be made at a future date or dates. It is acknowledged that the Alabama Consumer Credit Act does not apply to true leases; however, it is intended that credit insurance issued or sold in connection with true leases be subject to this chapter to the extent provided herein.

(i) CREDITOR. A person who regularly extends or arranges for the extension of credit for which the payment of a finance charge is required, whether in connection with loans, sales of property or services, or otherwise, and, for purposes of this chapter, "creditor" also includes a lessor, and any successor of the foregoing.

(j) DEBT CANCELLATION CONTRACT. A two-party agreement between a creditor and a debtor whereby the creditor agrees that, in the event of certain specified events, the creditor, or its assignee, will cancel all or some specified portion of the debt. A debt cancellation contract is not considered insurance, even if the creditor, independently of the debtor, has obtained insurance to cover all or part of the debt that the creditor has agreed to cancel.

(k) DEBTOR. A borrower of money or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction.

(l) ENROLL. The term "enroll" describes the process of adding debtors to a master group policy which includes informing the debtor of the coverage, recommending the purchase, calculating the insurance charge, preparing the certificate of insurance, answering questions regarding the coverage and/or otherwise assisting the debtor in making an informed decision whether or not credit insurance is to be elected as a part of a loan or other credit transaction.

(m) GAP AMOUNT. In a GAP insurance policy, any deficiency between the following:

1. The amount owed by the lessee or debtor under the lease, loan or other credit transaction as of the date of a total loss of the leased property or collateral caused by theft or physical damage.

2. The sum of the following:

(i) Any unpaid payments and other charges that accrued prior to the total loss.

(ii) The actual cash value of the leased property or collateral as of the date of the loss.

(n) GAP INSURANCE. Also known as "guaranteed asset protection" or "guaranteed automobile protection", insurance covering all or part of the gap amount in the event of a total loss of the personal property that is leased or that serves as collateral for the loan or other credit transaction. For the purposes of this chapter, GAP insurance does not include any debt cancellation contract as defined in this chapter where the lessor or creditor agrees to cancel all or part of the gap amount in the event of a total loss of the leased property or collateral. For the purposes of this chapter, GAP insurance does not include any insurance obtained by a lessor or creditor independently of the debtor, which insures only the lessor or creditor for all or part of the gap amount in the event of a total loss of any leased property or collateral, regardless of whether or not the gap amount is subject to a debt cancellation contract as defined in this chapter.

(o) LIMITED LINE CREDIT INSURANCE. Credit life insurance, credit disability insurance, and credit property and casualty insurance as defined in this rule.

(p) NONFILING INSURANCE. Insurance obtained by a creditor in lieu of filing a financing statement or recording a security instrument with governmental authorities. Nonfiling insurance protects the creditor in the event the creditor suffers a loss as a result of not perfecting its security interest in the collateral.

(q) PRODUCER. As defined in Section 27-7-1, Code of Ala. 1975.

Author: Reyn Norman, Associate Counsel

Ala. Admin. Code r. 482-1-111-.03

New Rule: April 19, 1995; effective May 1, 1995. Amended: February 28, 2000; effective March 9, 2000. Amended: September 19, 2002; effective September 29, 2002. Filed with LRS October 19, 2002. Rule is not subject to the Alabama Administrative Procedure Act.

Statutory Authority:Code of Ala. 1975, §§ 27-2-17, 27-7-43.