Section 0780-01-04-.04 - PROVISIONS OF POLICIES AND CERTIFICATES OF INSURANCE: DISCLOSURE TO DEBTORS(1) When credit insurance is effected on a debtor it shall be evidenced by an individual policy or, in the case of group insurance, which policy or certificate shall be delivered to the debtor at the time the indebtedness is incurred or within thirty days after the debtor becomes insured with respect to his indebtedness.(2) Each such individual policy, or certificate of group insurance shall, in addition to other requirements of law, set forth:(a) the name and home office address of the insurer, and(b) the identity of the debtor by name or otherwise and his age at issue or his date of birth, if the age is material to claim payment, premium calculation or reserve calculation; and(c) the amount and term of the coverage, if possible, otherwise a clear description of the means of determining the amount and time of expiry, and(d) the amount of premium or identifiable charge, if any, separately in connection with credit life insurance and credit accident and health insurance unless in the case of group insurance such premium or identifiable charge has been disclosed to the debtor as hereinafter provided in paragraph (3). A copy of the document bearing this information shall be forwarded to the insurer or retained by the creditor in a matter which will facilitate the good faith examination required in rule 0780-1-4-.07, and(e) the circumstances and formula under which refunds of premiums or identifiable charges are payable pursuant to the provisions of Rule 0780-1-4-.07 and(f) a description of the insurance coverage including any exceptions, limitations or restrictions, and in addition, shall state that the benefits shall be paid to the creditor to reduce or extinguish any unpaid indebtedness to the creditor. Where the amount of insurance exceeds any unpaid indebtedness that any such excess shall be payable to the debtor or to his designated beneficiary, other than the creditor, or, if he has designated none, to the estate of the debtor or under the provision of a facility of payment clause.(3) If said individual policy, or certificate of group insurance is not delivered to the debtor at the time the indebtedness is incurred, a copy of the application for such policy or a notice of proposed group insurance, signed by the debtor and the creditor/agent shall be delivered to the debtor at the time such indebtedness is incurred. Such application or notice shall set forth the following:(a) the name and home office address of the insurer, and(b) the identity of the debtor, by name or otherwise, and(c) the amounts or rates of premium or identifiable charge to the debtor, if any, separately in connection with credit life insurance and credit accident and health insurance, and(d) the amount and term of the coverage provided, or description as provided in (2)(c) above, and(e) a brief description of the coverage provided. However, where no identifiable charge is made to the debtor, the notice of proposed group insurance need not be signed by the debtor nor set forth his name. Such application for an individual policy or notice of proposed group insurance shall include a statement that, if the insurance is declined by the insurer or otherwise does not become effective, any premium or identifiable charge will be refunded or credited to the debtor pursuant to the provisions of Rule 0780-1-4-.07. The copy of the application for an individual policy and the notice of proposed group insurance shall refer exclusively to insurance coverage, and shall be separate and apart from the loan, sale or other credit statement of account, instrument or agreement unless set forth therein in a separate provision with an appropriate and prominent caption on the face or reverse thereof in type at least equal in size to the type used for the other provisions thereof. The insurer shall be responsible for establishment of procedures for delivery of the individual policy or certificate of group insurance to the debtor as provided in paragraph (1). Said application or notice of proposed group insurance shall provide that, upon acceptance by the insurer, the insurance coverage provided shall become effective as specified in paragraph (3) of Rule 0780-1-4-.05.
(4) No policy of credit accident and health insurance may contain a provision excluding or denying a claim resulting from a contingency caused by or contributed to by pre-existing conditions which provision is more restrictive than the following: "No insurance is provided hereunder if disability results from a disease, injury or condition of health for which the insured was hospitalized or received medical or surgical treatment or advise within the lesser of six months at the original term of the coverage immediately preceding the effective date of the coverage, if said death or disability occurs within the lesser of six months or the original term of the coverage immediately following such date, unless this policy (certificate) is issued in connection with a refinanced indebtedness, in which case, the effective date of the coverage shall be deemed to be the first date on which the insured became insured with respect to the indebtedness which was refinanced."
No such provision shall apply to credit life insurance.
This provision shall not be interpreted to preclude defense of a claim because of misrepresentation of facts in any evidence of insurability.
(5) Except as set forth in paragraph (4), no policy of credit accident and health insurance shall contain any provision which excludes or restricts liability in the event of disability by reason of conditions other than pregnancy, intentionally self-inflicted injuries, foreign travel or residence, travel in non-scheduled aircraft, war, or special hazards to which a person in military service is exposed in the line of duty and such other exclusions which have been shown to the satisfaction of the Commissioner not to be contrary to the standards prescribed in §§ 56-26-108 through 56-26-114. Excepting in the case of insurance sold in connection with a refinanced indebtedness, credit accident and health insurance shall not be issued to a debtor who is not gainfully employed on the effective date of the policy or certificate.
(6) A credit insurance policy may exclude from those persons eligible for insurance, classes debtors determined by age and provide for the cessation of insurance or reduction in the amount of insurance upon attainment of specified ages. In the event of misstatement of age, where age is material to the acceptance or rejection of the risk, the insurer may provide for rescission of the policy and a refund of all premiums paid by the debtor.(7) A group credit insurance policy under which premiums are paid to the insurer monthly on outstanding balances shall contain a provision that, in the event of termination of such policy by the insurer or creditor, thirty-one days' notice of such termination shall be given to each debtor insured under the policy by the creditor, unless there is immediate replacement of the coverage by the same or another insurer.(8) A group credit insurance policy shall contain in substance the following provisions: (a) A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium except the first, during which grace period the coverage shall continue in force, unless the policyholder shall have given the insurer written notice of termination in advance of the date of termination and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer for the payment of a pro-rata premium for the time the policy was in force during such grace period.(b) A provision that the validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that no statement made by or on behalf of any person insured under the policy relating to his age or insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person's lifetime, unless it is contained in a written instrument and such written instrument is signed by him. Such instrument shall not be in such form as to encourage misrepresentation or discourage disclosure of relevant facts.(c) A provision that a copy of the application of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by the persons insured shall be deemed representations and not warranties, and that no statement made by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or to his beneficiary.(d) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as to a part or all of his coverage.(e) A provision specifying an equitable adjustment of premiums or of benefits or of both in the event the age of a person insured has been misstated, and such misstatement would have affected the premium or amount of benefit, such provision to contain a clear statement of the method of adjustment to be used.(9) If credit accident and health insurance is included as a separate policy, the policy shall in addition, include such of the provisions required by T.C.A. § 56-26-108, as are not inconsistent with the coverage provided. Disability, provisions in credit life insurance policies shall be so worded as to the payment of benefits that they are at least as favorable to the debtor as policies containing such provisions.(10) Individual policies of credit life insurance shall include, in addition to the provisions set forth herein, such of the provisions of T.C.A. § 56-7-301, as are not inconsistent with the coverage.(11) No policy or certificate of credit insurance shall be delivered or issued for delivery to any person in this state, unless the style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text, and unless every printed portion of the text of the policy and of any endorsements or attached papers is plainly printed in light-face type of a style in general use, the size of which shall be uniform and not less than ten point with a lower case unspaced alphabet length not less than one hundred and twenty point (the, "text" shall include all printed matter except the name and address of the insurer, name or title of the policy, a brief description if any, captions and subcaptions, and any overprint or statement of Limitation of risk required by this or any other state to be more prominently displayed).(12) Dividends on participating individual policies of credit insurance shall be payable to the individual insureds. Payment of such dividends may be deferred until such time as the policy is terminated. Dividends (or retrospective rate credits in the case of non-participating group policies) on group policies may be paid or credited to the creditor policyholder, subject to the restrictions hereinafter contained. Such policies may provide that dividends or retrospective rate credits which are in excess of the contribution of the creditor may be paid or credited to the individual debtors or applied in some manner for the sole benefit of debtors generally. Attention is called to T.C.A. §§ 56-8-104(7), 56-8201, and 56-8-202, with respect to calculation of dividends and rate credits. Insurers shall be prepared to demonstrate to the Commissioner that such dividends or retrospective rate credits are in fact equitably determined. Dividends or retrospective rate credits shall be based on earned gross premiums and incurred claims as defined herein. Payment of dividends or retrospective rate credits based on any other assumption shall not be allowed.
Non-participating individual policies of credit insurance shall not be the subject of experience rating and no agent or creditor shall receive retrospective commissions or other compensation, direct or indirect, based on the experience of policies sold through him or on the lives of his debtors excepting as provided in this section.
For the purposes of T.C.A. § 56-4-204, retrospective rate credits shall be treated in the same manner as dividends in the computation of tax on gross premiums.
Tenn. Comp. R. & Regs. 0780-01-04-.04
Original rule certified June 10, 1974.Authority: T.C.A. §§ 45-5-405, 56-7-901, and 56-8-110.