Insurance Regs 10% Flashcards
Democratization of Credit
A bank should be willing to lend money if the borrower could show good character and the earning power to repay their debt
Creditor
Lender
Usually the beneficiary in credit insurance programs
Debtor
Person requesting to borrow money or lease from the creditor
The policy holder and person insured in credit insurance policies
Credit Insurance
Protects the lender from the borrowers inability to repay their loan.
Guarantees the repayment of a lenders loan and can generate a commission for the producer
Closed End Credit Transaction
When a borrower borrows a certain amount of money for a specified period of time.
Examples:
Car loans
Personal Loans
Mortgages
Open Ended Credit Transactions
A loan in which the amount of the credit extended can be increased at any time.
Has a cap or upper limit
Examples:
Home Equity Lines of Credit (HELOC)
Credit Cards
Proof of Insurance
Certificate of insurance that must be delivered to the insured debtor within 30 days of incurring the debt
Credit Life
Pays off the total unpaid indebtedness that is due to the creditor and no more
Term must not extend more than 15 days beyond maturity date of loan
Joint Credit Life
Coverage for two individuals on one loan and pays off the balance after the first death
Group Credit Life Eligibility
Under 70 yrs old and they must sign a waiver of good health.
Post Claim Underwriting
Determining that an individual does not meet underwriting requirements after the receipt of a claim and voiding or denying coverage on that basis.
Illegal in Micigan
Gross Indebtedness
> Total remaining principal, insurance premiums, and scheduled interest charges on a loan.
The total remaining financial obligation
Net Payoff
insurance will payoff the net indebtedness of the loan which is the total owed at that given time.
Does not payoff delinquent payments or late fees
Single Premium Mode
The premium for insurance coverage is added to the principal of the loan that is being financed
Monthly Outstanding Balance
Used on revolving, open-ended credit where the premium for insurance is collected monthly based on the outstanding balance at the end of that month
Term insurance
Gives an insured temporary death protection for a period of time
Decreasing term Insurance
Insurance used to payoff loans where the principal balance will decrease over time, ie, a mortgage.
The premium, payment amount, stays the same, but the benefit, amount of coverage, decreases
aka
Mortgage Cancellation Insurance
Level Term Insurance
The premium and the benefit amount stays the same over the life of the policy
Joint Credit Life
Covers the life of more than one debtor with a single policy
Truncated Life
Policy that provides protection for less than the term of indebtedness
Suicide Provision
Death benefits not payable due to suicide for the first two years
Disability Income Insurance
Pays a designated monthly amount to the beneficiary (creditor) if the borrower becomes disable due to accident or sickness and is unable to pay on their loan
Own Occupation
Definition used in Disability insurance when a person is unable to perform the duties of his or her trade.
A surgeon who loses the usage of his hand
Any occupation
Definition used in Disability insurance when a person is not able to perform the duties of any occupation which they have the skill and know how to perform
a mechanic who loses his hand can still work in sales but cannot do either if he cannot walk
Permanent and total Disability
If a borrower is considered permanently and totally disabled then the insurance company will pay off the total due on their credit product minus and late fees or delinquent charges incurred prior to the insured becoming disabled
Elimination Period (EP)
A waiting period between the time when an individual is first considered disabled to the time when the insurance company begins to draft benefit payments on their behalf.
Just like when you get in an auto accident you have a deductible, the elimination period is a time deductible for the insurance company. It stops frivolous short term claims.
If the insured satisfies the ep and goes on disability then back to work and is off on a second disability, the ep starts over again
Probationary Period
Period of time between when an insured individual first gets their insurance policy and when they are able to use their new insurance to receive benefits.
Only one Probationary Period must be satisfied per insurance policy
Disability Payments
Closed end Loans- the required monthly payment
Open ended Loans- The minimum payment due
Critical Period Disability Coverage
Coverage offered for the life of the loan but with benefits limited to a specified number of monthly payments or the remaining periods if less
Truncated Disability Coverage
Coverage offered during a portion of the term of the loan.
Benefits are paid only if the disability occurs during the term of coverage.
Monthly benefits payments continue only until the end of the term of insurance
Disability Exclusions
- Pre Existing Conditions
- Self-Inflected Injury
- Pregnancy
- Aviation for Aviation Students, Military and private Aircraft Pilots
- War and Acts of War
Credit Property Insurance
Cancels the debt owed purchased on an insured’s credit if the property is destroyed by specific perils like an accident, theft, flood, or earthquake
Guaranteed Automobile Protection (GAP)
“Debt Cancellation Policy” provides funds in the event that a borrower suffers a total loss of a vehicle where the loan balance is more than the amount of insurance coverage
Mortgage Guaranty Insurance ( PMI)
Provides Indemnification to the lender in case a borrower fails to make mortgage payments on their loan.
Fair Credit Reporting Act
A federal law which regulates confidential, fair and accurate reporting of consumer information
