NAC675.020. Credit life insurance and credit health or disability insurance.

     1. As used in this section, “credit insurance” means both credit life insurance and credit health or disability insurance.

     2. If a licensee provides, obtains or arranges any credit insurance as security for a loan, the premium or cost of such insurance to the borrower must not exceed the rate or rates established by the Commissioner of Insurance pursuant to the insurance laws. The insurance is subject to the laws and regulations of the Division of Insurance of the Department of Business and Industry.

     3. If a loan on which credit insurance has been obtained, arranged or provided by the licensee is prepaid in full, a refund of a portion of the insurance premium or cost must be made to the borrower, unless such prepayment in full was by death claim. If the insurance refund plus interest refund together amount to less than $1, no refund need be made.

     4. When a loan is prepaid in full by a death claim payment, the unearned portion of credit health or disability insurance premium must be refunded as of the date of death, but no refund may be made as to premiums paid for credit life insurance.

     5. Only one party obligated on the loan may be covered by such credit insurance, and the premium or insurance cost may only be collected with respect to that party.

     6. No statement, direct or implied, may be made to any borrower which would lead the borrower to believe that the granting of a loan was contingent upon his obtaining credit insurance as security for the loan.

     7. Licensees shall post in each loan interview position a sign with the following language clearly printed in 3/8-inch print: “The purchase of credit life or accident and health insurance is not required as a condition for the granting of a loan.”

     8. If an insured borrower dies during the term of the loan contract, the credit life insurance must be sufficient at least to pay an amount which will discharge the loan completely at the date of death, without any exception, reservation or limitation.

     9. If the premium or insurance cost is computed on the principal amount of loan and not also on interest and service fee contracted to be paid, the entire proceeds of any death claim to the extent provided in subsection 8 must be payable to the licensee.

     10. If the premium or insurance cost is computed on the total original amount of the note (principal plus interest and service fee), the proceeds of any death claim must not be less than the greater of the following:

     (a) The unpaid balance of the face amount of the note, principal plus the combined interest and service fee, which under the contract is scheduled to be outstanding at the date of death (also referred to as the scheduled balance); or

     (b) The actual unpaid amount of the loan, which is the unpaid balance of the face amount of the note less the required refund of interest and service fee, which refund must be computed as at the date of death (referred to as the net balance).

     11. Whenever the amount of any death claim is in excess of the net balance due at the date of death, the excess must be paid by the licensee to the estate of the borrower, the surviving spouse or the next of kin and this must be an obligation of the licensee. Licensees also are required to see that insurance policies arranged in connection with loans provide for death claims to be paid in accordance with this section. The licensee’s records must reflect accurately the amount of the death claim, the amount, if any, in excess of the net balance and the person to whom the excess was paid.

     [Banking Div., Installment Loan Reg. No. 4, eff. 5-22-72]—(NAC A by Comm’r of Insurance, 5-27-92)