Rule 120-2-27-.09. Mandatory Provisions in Policies and Certificates of Credit Insurance; Disclosure to Debtors; Proper Construction of Certain Policy Provisions Defined

1. (1) On the face of each individual policy, group policy, group certificate or notice of proposed insurance there shall be placed a title which shall briefly and accurately describe the nature and form of the policy.
2. (2) Every printed portion of the policy, certificate, or notice of proposed insurance and any endorsements thereto or applications therefor must be plainly printed in light-faced type of a style in general use, the size of which shall be uniform and not less than ten-point.

3. (3) Each individual policy, group policy, and group certificate shall state that the benefits payable thereunder shall only be paid to the creditor to reduce or extinguish the debtor's then outstanding loan balance in the case of credit life insurance coverage or the exact amount of the debtor's covered installment payment due in the case of credit accident and sickness insurance and shall further state that if the amount of insurance benefits payable exceeds the insured's then outstanding insured loan balance in the case of credit life insurance or the exact amount of the debtor's covered installment payment due in the case of credit accident and sickness insurance by an amount of ten dollars ($10.00) or more, such excess amount shall be payable either to the debtor or to a beneficiary named by the debtor other than the creditor or to the debtor's estate.

   1. (a) Payment of any such excess amount to the debtor or to any beneficiary named by the debtor other than the creditor or to the debtor's estate shall be made payable by check or draft of the insurer and shall be made payable only to such debtor or to such other beneficiary named by the debtor or to such debtor's estate, provided that at the option of the insurer, the delivery of such excess benefit check or draft may be accomplished by the creditor acting as an authorized agent of the insurer. For the purpose of this Rule, the term "excess amount" shall mean any amount which is payable to the debtor or to the beneficiaries of the debtor other than the creditor or to the debtor's estate under the credit insurance policy which exceeds the amount necessary to extinguish the debtor's then outstanding insured loan balance in the case of the credit life insurance, or the exact amount of the debtor's covered installment payment due in the case of credit accident and sickness insurance by an amount of ten dollars ($10.00) or more.

4. (4)

   1. (a) No credit insurance form used in this State shall refer to an aggregate maximum amount of insurance for all indebtedness, for all certificates or for all individual policies. However, a company may establish an underwriting maximum amount of insurance per indebtedness, per certificate or per individual policy and, if established, the insurer must clearly set forth on each individual policy and each certificate that the maximum amount of insurance applies to each indebtedness, each certificate, or each individual policy.
   2. (b) If an insurer fails to comply with the provisions of O.C.G.A. Sections 33-27-1(2)(d), 33-27-1(3) and 33-30-1(4) by insuring a debtor under a group policy in an amount in excess of the amount authorized by law, or insures a debtor for an amount of credit life insurance or credit accident or sickness insurance greater than the maximum amount set forth in the group policy, and a claim occurs or commences, the full amount of credit life insurance insured under each certificate shall be payable on the death of the debtor, and the full amount of credit disability benefits insured under each certificate shall be payable upon the disability of the debtor. If a certificate has been issued in error to a debtor, under which the amount of insurance exceeds the indebtedness, or the maximum amount set forth in the group policy, or the maximum amount authorized by law, the insurer has the right, before a claim occurs or commences, to correct the amount of insurance not to exceed the maximum amount set forth in the group policy or the maximum amount authorized by law. Where a lower premium results, a refund is required.
   3. (c) If an insurer insures a debtor for an amount of credit life insurance or credit accident and sickness insurance greater than the maximum amount set forth in an individual credit insurance policy, and a claim occurs or commences, the full amount of credit life insurance set forth in the individual policy shall be payable on the death of the debtor, and the full amount of credit accident or sickness insurance benefits insured under the individual policy shall be payable upon the disability of the debtor. If an individual credit insurance policy has been issued in error to a debtor, under which the amount of insurance exceeds the indebtedness, or the maximum amount set forth in the individual credit insurance policy, the insurer has the right, before a claim occurs or commences, to correct the amount of insurance not to exceed the maximum amount set forth in the individual policy. Where a lower premium results, a refund is required.
5. (5) In any refinancing of an insured indebtedness, the effective date of the coverage as it affects any policy provision shall be deemed to be the first date on which the debtor became insured under the initially purchased policy or certificate covering the refinanced indebtedness, at least to the extent of the amount and term of the indebtedness outstanding at the time of refinancing.
6. (6) Every individual credit insurance policy and certificate of insurance shall contain a schedule of benefits section.

7. (7) Where insurance is written to cover any of the following transactions, the types of insurance, terms and disclosure notices must conform to the following requirements:

   1. (a) Balloon Transactions and Open-end Lease Agreements. Net decreasing term insurance shall be the only authorized coverage.

      1. 1. Where insurance is written to cover balloon transactions and disability insurance is purchased, the balloon payment must be indicated in the schedule and the following disclosure notice, using the same or substantially equivalent language, must appear in bold print on the face of the individual policy or the certificate of insurance:

         NOTICE: If you are eligible for total disability benefits on the disability insurance expiration date, your balloon payment shown in the schedule will only be insured up to an amount equal to the monthly total disability benefit.

      2. 2. The disclosure notice for open-end lease agreements providing for disability coverage, must contain the following notice using the same or substantially equivalent language:

         NOTICE: If you are eligible for total disability benefits on the disability insurance expiration date, the end of the term residual value shown in the schedule will only be insured up to an amount equal to the monthly disability benefit.

         This notice must appear in bold print on the face of the individual policy or the certificate of insurance, with the end of the term residual value shown in the schedule. The debtor must have a binding contractual obligation to purchase the item(s) leased at the end of the lease term. Proof of a binding contractual obligation must be submitted with the credit insurance forms.

   2. (b) Truncated Term. Net decreasing term insurance shall be the only authorized coverage. The schedule must show the maturity date of the loan and the following notice, using the same or substantially equivalent language, must appear in bold print on the face of the individual policy or certificate of insurance:

      NOTICE: The life insurance benefit might not completely pay off your loan. If the term of your loan exceeds the terms of insurance, the death benefit is only payable if death occurs during the term of the insurance. Total disability benefits will not be paid for any period of total disability continuing after the termination date shown in the schedule.

   3. (c) Revolving or Open-end Credit Transactions. The following notice, using the same or substantially equivalent language, must appear in bold print on the face of an individual policy or certificate of insurance to address the effective date and termination date of coverage:

      NOTICE: Coverage will be effective from the time the account has a balance and will continue, subject to policy provisions, as long as there is an open balance. Coverage will cease when the account does not reflect an open balance and will automatically be reinstated when there is an open balance, subject to the termination provisions herein.

   4. (d) Critical Period Disability. The following notice, using the same or substantially equivalent language, must appear in bold print on the face of the individual policy or certificate of insurance:

      IMPORTANT NOTICE TO DEBTOR: If the term of your loan exceeds thirty-six (36) months, the credit disability coverage provided by this policy is limited. This coverage provides for an aggregate disability benefit which is limited to thirty-six (36) times your monthly disability benefit.

Submitted for Publishing: Apr. 6, 2007.

Authority: O.C.G.A. Secs. 33-2-9, 33-27-1, 33-30-1, 33-31-7, 33-31-8, 33-31-12.

History. Original Rule entitled "Mandatory Provisions in Policies and Certificates of Credit Insurance; Disclosure to Debtors; Proper Construction of Certain Policy Provisions Defined" adopted. F. Mar. 8, 1977; eff July 1, 1977, as specified by the Agency.

Amended: F. Dec. 7, 1984; eff. Jun. 1, 1985, as specified by the Agency.

Amended: F. Oct. 12, 1993; eff. Nov. 1, 1993.

Amended: F. Dec. 6, 1993; eff. Dec. 26, 1993.