This document discusses rules and requirements for offering credit insurance as part of sales finance and bulk purchase transactions. Key points include:
- Insurance can only be offered through a licensed agent, and the agent's license must be verified. In some states the agent must be present during transactions.
- The insured must receive an insurance certificate or policy copy within 30 days. A copy must also be kept in the customer's file.
- Coverage may be optional or required, and proper disclosures are needed if optional. Signatures are required to indicate choice of coverage.
- The seller must promptly remit insurance premiums, less refunds and commissions, to the insurance carrier.
5. Licensed Agents
•
Insurance can only be offered through a licensed agent.
•
•
•
Request a copy of license to be sure that it is current.
All states require that a copy of the agent’s license be posted in
the office.
There are requirements for agent involvement in the offering of
insurance.
•
Vary by state.
•
Verify laws are being followed by asking for a copy of the license.
•
Verify that an agent signature is found
on insurance forms.
6. Licensed Agent Responsibilities by State
State
Rule
AL
Agent must be available to answer questions, but does not have to be
present in person and does not have to close the transaction.
GA
Agent must be present to answer questions but does not have to close
the transaction.
LA
Agent must be available to answer questions but does not have to be
present in person and does not have to close the transaction.
MS
Agent must offer the coverage personally and must be in the office when
the transaction is closed.
SC
Agent must be available to answer questions but does not have top be
present in person and does not have to close the transaction.
TN
Agent must offer the coverage personally and must be in office when the
transaction is closed.
7. Insurance Certificates
•
The insured must receive a copy of the certificate of insurance
or the policy.
•
•
Closing of the transaction
By mail within 30 days of the closing.
•
A copy must be placed in the customer’s file.
•
Missing documents may indicate:
•
(1) a copy is not being given to the insured,
•
(2) a copy is not being mailed to the insured,
•
(3) the Seller is not maintaining his files properly, or
•
(4) the insurance premiums are being collected
but not remitted to the carrier.
8. General Rules
SCHEDULE OF INSURANCE
VS
CERTIFICATE OR POLICY
•
•
A Schedule of Insurance contain the basic
information related to the insurance such as
effective date, term of coverage, expiration date,
premium amount, and coverage amount. It may
or may not contain some of the additional policy
language. A Schedule when given to the insured
does not satisfy the requirement to provide a
certificate or policy within 30 days. It also does
not satisfy the requirement to retain a copy of the
certificate or policy in the customer’s file. When
you see only a Schedule in the customer’s file, you
must (1) confirm that an Individual Policy has been
issued and mailed to the insured and ask why
there is no copy in file, or (2) confirm that a
Certificate has been issued and mailed to the
insured and ask why there is no copy in file. Also
request a copy of the Group Policy.
•
•
A Group Policy (sometimes called a Master Policy or Control
Policy) multiple insured individuals are covered under one
policy. Certificates are issued to the individuals.
A Certificate of Insurance is issued only in connection with a
Group Policy (sometimes called Master Policy or Control Policy).
A Certificate will contain at least a portion of the terms of the
Group Policy and sometimes will contain all of the terms. The
Certificate should always refer to the Group Policy, and the
Seller should have a copy of the Group Policy. When you see a
certificate instead of a policy, you must obtain a copy of the
group policy from the Seller.
An Individual Policy stands alone. It is not group coverage, so
there is no certificate.
9. General Rules
•
Population will depend on the type insurance
offered and authorized by the customer. The type
insurance written will also affect how refunds are
handled. See # 11 below.
10. Insurance Options
• Disability
insurance
• 3, 7, 14, or 30 day
non-retro
or
• 3, 7, 14, or 30 day
retro.
Either single or joint
coverage can be offered.
Either single or joint
coverage can be offered.
• Life
insurance
• Level-term
• Gross
decreasing
term
• Net decreasing
term
• Net decreasing
term + XX
payments
12. General Rules
•
Credit insurance products - A&H, Life and IUI coverage may be optional
or required.
•
If coverage is required, you should determine that the premiums have been
included in the finance charge and reflected in the APR.
•
If the coverage is optional, the premiums for coverage and other related
information must be disclosed in writing.
•
The insured must indicate their choice of coverage in writing by signing or
initialing.
•
Required disclosures and signature (or initials) may be found in the seller’s
documents or the insurance forms.
•
Use of model disclosures provides a TILA safe harbor.
•
We offer these products as optional coverage using
the model disclosure format.
•
A seller who requires the products should clearly
state that they do so.
13. General Rules
•
Coverage on consumer goods or motor vehicles may be
required. However, the seller can not require that the buyer
purchase credit insurance.
•
This coverage may be provided in one of three ways:
•
(1) an existing outside policy that the buyer holds (by endorsement),
•
(2) a new policy purchased outside by the buyer (by endorsement),
•
(3) credit insurance that the seller offers.
•
Required disclosures may be in the seller’s documents or the insurance
forms.
•
Use of model disclosures provides a TILA safe harbor.
14. General Rules
•
It is important to confirm that the seller is promptly remitting
net premiums to the insurance carrier.
•
Obtain insurance company name, contact person, and telephone
number.
•
Confirmation may be one of two ways:
•
Request to see a copy of a monthly remittance check. The check should be
for the premium written less refunds made less commission. The
remittance should occur within the month following the activity which it
represents.
•
Contact the carrier to confirm that the seller is remitting
net premiums promptly and is in good standing.
15. General Rules
•
Separate from the Compliance review is a discussion of how the
existing insurance policies will be handled if we purchase the
accounts.
•
Will we report refunds direct to the carrier and receive refund checks
direct from the carrier?
•
Will we report refunds to the seller and receive reimbursement from
the seller?
•
How often will we report refunds, and what information is required for
this reporting?
•
How will claims be handled?
16. General Rules
•
Account servicing rules must be reviewed prior to purchasing
the accounts. For each insurance type, you must identify and
document the following:
•
Refund method
•
Number of days elapsed for earning each month’s premium
•
Whether months are counted by loan months or payment periods
•
Minimum refund provisions
•
Time period during which 100% refund must be given
•
Special refund rules in the event of a claim
17. Special State Rules
•
•
•
Alabama can offer only net decreasing or net + 1 decreasing life
insurance.
South Carolina can offer level-term life insurance only on singlepayment accounts.
Pro rata refunding is required for level-term life insurance in all
of the States in which we operate.