Section R20-6-604.01. Rights and Treatment of Debtors

A.      Creditor Obligations.

1.        Multiple plans of insurance. If a creditor makes more than one plan of credit insurance available to debtors, the creditor shall inform each debtor of each plan for which the debtor is eligible and of the premium and charges for each plan.

2.        Substitution. If a creditor requires a debtor to have credit insurance as additional security for a debt, the creditor shall inform the debtor in writing of the debtor’s right to obtain alternative coverage as prescribed in A.R.S. § 20- 1614 before the loan transaction is completed.

3.        Remittance of premiums. If a creditor adds an insurance charge or premium to a debt, the creditor shall remit the insurance charge or premium to the insurer within 60 days after it is added to the debt.

B.       Creditor and insurer obligations regarding insurance on refi- nanced debt.

1.        If a debt is discharged because the debtor refinances the debt before the scheduled maturity date, the creditor shall notify the insurer that issued the credit insurance on the discharged debt.

2.        An insurer shall not issue any credit insurance that covers the refinanced debt with an effective date preceding the termination date of the insurance on the original debt.

3.        The insurer issuing the coverage on the discharged debt shall refund to or credit the debtor with all unearned insurance charges or premium according to R20-6- 604.06.

4.        If a debt is refinanced, the effective date of the policy provisions in any new insurance covering the refinanced debt shall be the first date on which the debtor became insured under the previous policy. An insurer may apply any new exclusion period or preexisting condition limita- tion only to the portion of the new loan that exceeds the previous loan.

C.      Required policy provisions.

1.        Termination provisions for group policies. A group credit insurance policy shall provide for continued coverage of debtors covered under the policy if the policy terminates, as follows:

a.         For a policy with a single premium payment, or any other payment  method that  prepays coverage for more than one month, a provision requiring contin- ued insurance coverage for the entire period for which the premium has been paid; and

b.        For a policy with a monthly premium payment, a provision requiring the insurer to send the debtor a termination notice at least 30 days before the effec- tive date of termination, unless an insurer is issuing replacement coverage in at least the same amount, without lapse of coverage.

2.        Maximum aggregate provisions. A provision in an indi- vidual policy or group certificate that sets a maximum limit on total claim payments shall apply only to that indi- vidual policy or group certificate.

D.      Creditor and insurer obligations when debtor prepays debt.

1.        Except as provided in subsection (D)(2), if a debtor pre- pays a debt in full, any credit insurance covering the debt shall terminate on the date of prepayment. The creditor and insurer shall refund to or credit the debtor with any unearned premium according to R20-6-604.06.

2.        If a debt is fully prepaid because of the debtor’s death or any other lump-sum credit insurance payment, a creditor or insurer is not required to refund premium for the cov- erage under which the lump sum was paid.

3.        If a claim under credit disability coverage is in progress at the time of prepayment, the insurer:

a.         May calculate the refund as if the prepayment did not occur until the end of the period for payment of benefits, and

b.        Is not required to refund premiums for any period for which credit disability benefits are payable.

E.       Benefits payable on revolving account. If a debtor is paying for credit insurance coverage on a revolving account and dies, the insurer shall pay a benefit amount equal to the amount of indebtedness outstanding on the date of death. The insurer may exclude preexisting conditions occurring within six months of any advance on the revolving account, running sep- arately for each advance or charge.

Historical Note

New Section made by final rulemaking at 8 A.A.R. 2725, effective June 7, 2002 (Supp. 02-2).