31.13.01.13

.13 Underwriting Requirements for Credit Life Prima Facie Premium Rates.

A. The prima facie premium rates used in Regulations 10—.11 of this chapter assume that contracts providing credit life insurance do not require evidence of individual insurability from any eligible debtor electing to purchase coverage within 30 days of the date the debtor becomes eligible.

B. If an insurer requires evidence of insurability from debtors electing to purchase coverage within 30 days of the date they become eligible and the initial amount of credit life insurance or the insurable maximum revolving credit account limit of an insured debtor does not exceed $15,000, the insurer shall reduce the premium rates stated in Regulations .10—.11 of this chapter by 10 percent on all:

(1) Individual policies of credit life insurance issued through the same creditor, regardless of whether the initial amount of credit life insurance or the insurable maximum revolving credit account limit exceeds $15,000; or

(2) Certificates of credit life insurance issued under the group policy through the same credit or creditor, regardless of whether the initial amount of credit life insurance or the insurable maximum revolving credit account limit exceeds $15,000.

C. Subject to the conditions and requirements of Regulations .08, .09, and .18 of this chapter, the maximum premium rates shall be the rates stated in Regulations .10—.11 of this chapter if the:

(1) Insurer requires evidence of insurability only from debtors whose initial amount of insurance or insurable maximum revolving credit account limit exceeds $15,000; or

(2) Debtor elects to purchase coverage more than 30 days after the date the debtor became eligible.

D. For individual policies or for certificates of insurance issued under group policies insuring open lines of credit, the insurer may require evidences of insurability for:

(1) Advances which increase the outstanding indebtedness over $15,000; or

(2) Increases in the insured debtor's insurable maximum revolving credit account limit that increase the limit over $15,000.

E. Underwriting Limitations.

(1) Regardless of policy or certificate amounts, the underwriting limitations specified in this section apply.

(2) The policy contains no provision which excludes or restricts liability for death caused in a certain specific manner or occurring while the insured has a specified status, except that the policy may exclude death resulting from suicide within 6 months after the effective date of coverage.

(3) There are no age restrictions, or the only age restrictions are those which comply with this regulation and the insured acknowledges on the application that he is aware of the age restriction.

(4) The insurer, at its option, may adopt any one of the following provisions with regard to age limitations:

(a) The policy may provide that the insurer may terminate the insurance within 60 days after the effective date and refund all premiums paid by the debtor if the debtor's true age is greater than the limiting age stated in the policy. The notice of termination shall state that the premium paid by the debtor shall be refunded to the person entitled to it. Under this provision, an insurer using this method shall pay the claim in full if the insurer does not terminate the coverage within 60 days or if the debtor dies within the 60-day period but before notification by the insurer of termination.

(b) The policy may provide that debtors who have reached age 65 on the effective date of the insurance are not eligible for insurance. However, if an individual policy or a certificate of insurance issued under a group policy is issued beyond the age limits established in the policy due to misstatement of age of the debtor, §E(4)(d) of this regulation shall apply. On policies issued on the outstanding balance insurance basis, the policy may exclude from the classes eligible for insurance, debtors who have reached age 65, and provide for the termination of insurance or reduction in the amount of insurance upon the debtor's attaining a stated age not less than 65. If premium charges continue to be made beyond the stated age due to misstatement of age of the debtor, §E(4)(d) of this regulation applies. If premium charges continue to be made beyond the stated age even though the correct age of the debtor is known to the insurer or to the creditor, the insurer shall pay in full any claim for loss occurring during any period for which a premium has been charged.

(c) The policy may provide that debtors who will have reached age 69 on the scheduled maturity date of the indebtedness or, at the option of the insurer, on the expiration date of the insurance, are not eligible for insurance. However if an individual policy or a certificate of insurance issued under a group policy is issued beyond the age limits established in the policy due to misstatement of age of the debtor, §E(4)(d) of this regulation applies.

(d) In the case of a single premium policy issued in accordance with §E(4)(b) or (c) of this regulation and in the case of an outstanding balance policy issued in accordance with §E(4)(b) of this regulation, the policy shall contain a provision that if the debtor misstates the debtor's age, the benefit shall be such as the premium paid would have purchased at the correct age. For purposes of administering this requirement, the reduction in benefits for persons over the limiting age stated in the policy where the limiting age is age 65 on the effective date of the insurance shall be not less favorable to the insured debtor than a benefit provided in accordance with the following table:

If age has been misstated
and correct age on
effective date was
Coverage to be
afforded is
65 or under 100 percent
66—70 80 percent
71—75 60 percent
76—80 40 percent
81—85 30 percent
86 and over 20 percent

When the limiting age stated in the policy is other than age 65 the effective date of the insurance or when the limiting age is stated on a basis of the insured attaining a particular age on the scheduled maturity date of the indebtedness, or, at the option of the insurer, on the expiration date of the insurance, the insurer shall file with the Commissioner an appropriate table similar to the one above for reduction in benefits in the event of misstatement of age.

(5) In the case of a policy providing joint life coverage:

(a) If the first death to occur during the term of insurance is that of an insured debtor whose age has been correctly stated, there may not be a reduction in the amount otherwise payable under the policy;

(b) If the first death to occur during the term of insurance is that of an insured debtor whose age has been incorrectly stated, adjustment may be made in accordance with the procedure stated in this regulation.

(6) When the age of the debtor has been misstated and the debtor's true age on the effective date of the insurance is beyond the limiting age or if premium charges continue to be made beyond the termination age in the case of outstanding balance insurance due to misstatement of age of the debtor, instead of the adjustments for payment of benefits provided in §E(4) of this regulation, the insurer, at its option, may void the insurance within 2 years from the effective date (or at any time after that date if the debtor dies within the 2-year period) and refund the premium paid if at the time of the debtor's application the insurer has obtained a separate statement signed by the debtor that the debtor is aware that no insurance will be provided beyond the stated limiting age. This separate statement shall be printed in 18-point boldface capital letters. A copy of the statement shall be given to the applicant at the time of the application and the original shall be kept on file by the insurer until at least 1 year beyond the date the indebtedness is satisfied in the case of single premium insurance, or until at least 1 year beyond the date that the debtor's insurance is cancelled in the case of outstanding balance insurance.