Consumer Credit Insurance Basics (p 41-47) Flashcards
Credit life insurance
Insurance on the life of a debtor pursuant to or in connection with a specific loan or other credit transaction
Credit accident and health insurance
Insurance on a debtor to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is disabled as defined on policy
Creditor
The lender of money or vendor or lessor of goods, services, property, rights or privileges, for which payment is arranged through a credit transaction or any successor to the right, title or interest of any such lender, vendor or lessor
Debtor
A borrower of money or purchaser or Lesee of goods, services, property, rights or privilages for which payment is arranged through a credit transaction
Indebtedness
The total amount payable by a debtor to a creditor in connection with a loan or other credit transaction
Credit life insurance
Pays off all or some of your loan if you die during the term of coverage
Credit IUI
Involuntary loss of income insurance, it pays a specified number of monthly loan payments if you lose your job due to no fault of your own during the term of coverage
Credit property insurance
Protects personal property used to secure the loan if destroyed by events like theft, accident, or natural disasters during the term of coverage
Markets credit insurance is sold in
Credit unions, banks, finance companies, automobile dealers, retailers, credit card companies.
The purpose of credit insurance
To guarantee the repayment of their loans to earn a commission
Closed-end transaction
Borrowing a certain amount of money for a specific period of time (Installment loans/single payment loans/balloon payments)
Open-end transaction
A loan in which the amount of the credit extended can be increased at any time (credit cards/line of credit) The monthly outstanding balance premium determination is whereby the balance is multiplied by the premium rate per $1000 of coverage
Group Credit Insurance
Covering a group of individuals and the insurer issues a master policy then issues certificates of insurance to each person covered
A certificate of insurance must be delivered to the insured debtor within ____ days of incurring the debt (group insurance)
30
Maximum coverage and term of coverage of credit life or A&H (individual insurance)
Cannot exceed the total amount of indebtedness but cannot extend more than 15 days beyond the maturity date of the indebtedness
When is joint credit life insurance paid out?
upon the first death
The commissioner has how many days after receipt to approve or disapprove policies, forms, premiums, etc.
30 days
With group credit insurance, who must be eligible?
all debtors
Group insurance policy premiums are usually subject to what?
experience rating
All groups are rated together AKA…
Community rating
Post-claim underwriting
unlawful in Michigan determining whether an individual meets underwriting criteria after the receipt of a claim and voiding coverage or denying the claim based upon that determination
Termination of group credit insurance
Coverage shall be continued for the entire period for which the single premium has been paid.
Termination of group credit insurance notice
30 days before the effective date of termination
Credit life insurance maximum coverage (gross coverage)
The total amount indebtedness owed under a closed-end agreement
Net payoff coverage
Amount of insurance covers the net indebtedness of the loan which is the total amount owed at any given point in time – would not include the unpaid interest for the remaining term of the loan
