New Jersey Administrative Code › Title 11 - INSURANCE › Chapter 2 - INSURANCE GROUP › Subchapter 3 - CREDIT LIFE INSURANCE AND CREDIT ACCIDENT AND HEALTH INSURANCE › Section 11:2-3.5 - Term

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The term of any credit life insurance or credit accident and health insurance shall, subject to acceptance by the insurer, commence on the date when the debtor becomes obligated to the creditor which may be deemed to be the date from which interest or finance charges on the indebtedness accrue, if later; except that, where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to such indebtedness shall commence on the effective date of the policy.
(b) Where evidence of insurability is required and such evidence is furnished more than 30 days after the date when the debtor becomes obligated to the creditor, then if such evidence is determined by the insurer to be satisfactory, the term of the insurance shall commence on the date on which such evidence is furnished, and in such event that there shall be an appropriate refund or adjustment of any charge to the debtor for the insurance.
(c) The term of such insurance shall not extend more than 15 days beyond the scheduled maturity date of the indebtedness except when extended without additional cost to the debtor.
(d) If the indebtedness is discharged due to prepayment, the insurance in force shall be terminated and, if the indebtedness is discharged due to renewal or refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the renewed or refinanced indebtedness.
(e) In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in 11:2-3.2 0.
(f) Credit accident and health insurance which limits the length of monthly benefits to the lesser of a specified period or the remainder of the loan is permissible only if the specified period is 24 months or more.
(g) Truncated credit life insurance coverage may be offered only in connection with loans and credit transactions having a term of eight years or more and only on a form specifically filed for use with such loans and credit transactions. Truncated credit accident and health insurance may be offered only in connection with loans and credit transactions having a term of six years or more and only on a form specifically filed for use with such loans and credit transactions. Truncated credit insurance shall comply with the following requirements:
1. Insurers shall provide in boldface, 10 point type notice at the time of application that the insurance coverage is truncated, does not cover the entire length of the loan and that the debtor may have the opportunity to elect coverage for the full term of the indebtedness. Such notice shall contain a date and signature section to be completed by the applicant. The notice form together with a statement of the manner in which the notice will be provided to applicants, shall be submitted with the truncated credit forms to the Commissioner for approval.
2. Life insurance coverage shall be net coverage.
3. When offered through a group policy, the amount of the coverage shall not exceed $ 75,000 when the coverage is offered in connection with a real estate mortgage and $ 40,000 in all other cases.
4. Single premiums may be financed either over the insured period or over the term of the loan. The same method of financing single premiums, however, shall apply to all insureds covered under a single policy form.
5. Coverage shall be for a term of no less than five years for credit accident and health insurance and of no less than seven years for credit life insurance when the credit life insurance is being placed on loans having a term of eight to 15 years. For loans with a term in excess of 15 years, credit life insurance shall be for a term of not less than eight years. Credit life insurance for a shorter term than specified herein may be offered, provided that in such cases, coverage shall be guaranteed renewable for not less than the initial term period or the remainder of the loan term, whichever is less, or as an alternative to offering to renew the truncated credit insurance on a guaranteed basis the insurer offers truncated credit insurance policyholders and certificate holders the option to convert to an individual decreasing term life insurance policy at the expiration of the truncated coverage. The terms of such conversion right shall be as follows:
i. The initial face amount of such decreasing term life insurance policy shall be at least equal to the outstanding balance of the loan at the expiration of the truncated coverage.
ii. The term of such decreasing term insurance policy shall be at least equal to the remaining loan term.
iii. The truncated credit insurance policy shall provide that upon expiration of the truncated credit insurance coverage, the debtor shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual decreasing term life insurance policy, provided application for the individual policy shall be made, and the first premium paid to the insurer, within 31 days after such expiration.
iv. The insurer shall notify the debtor at least 15 days prior to the expiration of the truncated credit insurance coverage of the right to convert such coverage. If such notice is not timely provided, the debtor shall have an additional period in which to exercise his or her right to convert, which period shall expire 15 days after the debtor is given such notice. In no event shall such additional period extend beyond 60 days after the expiration date of the period provided in the truncated credit insurance policy. Written notice presented or mailed to the debtor at his or her last known address shall constitute notice.
6. Initial premium rates shall be actuarially equivalent to the prima facie rates, and will be reviewed on a case-by-case basis. The single premium charges for credit life insurance shall be calculated in the following manner:
i. For each month of coverage, a charge for that month shall be determined based on the amount of coverage and the monthly outstanding balance prima facie rate.
ii. The charges shall be discounted at a nominal rate no less than five percent. The Commissioner shall review this discount rate on a triennial basis and provide public notice of any adjustments to this discount rate by publication in the New Jersey Register. Any such adjustment shall be based on the average of the rates being paid at that time on three-year United States Treasury Notes as reported in the Wall Street Journal on the last day of sale in the most recent three calendar years.