N.Y. Comp. Codes R. & Regs. tit. 11 § 185.6

Current through Register Vol. 46, No. 25, June 18, 2024

Section 185.6 - Amount and term of credit life insurance and credit accident and health insurance

(a) The amount of credit life insurance is limited as follows:

(1) The amount of insurance on any person insured under a policy shall not at any time exceed, but may be less than:

(i) in all cases, except as hereinafter provided, the lesser of any statutory limit or the greater of the actual amount of unpaid net indebtedness and the scheduled amount of the unpaid net indebtedness.

(ii) in the case of a loan commitment pursuant to a program for defraying the cost of attendance of a student at a college or university or at an elementary or secondary school, the lesser of any statutory limit and the total of the unpaid balance of the scheduled periodic payments, whether due or not due, and the amount of any outstanding loan commitment pursuant to such a program;

(iii) in the case of a transaction secured by a real estate mortgage, the lesser of any statutory limit and the amount of the indebtedness so secured;

(iv) with respect to loans made by production credit associations organized pursuant to the Farm Credit Act of 1933, 12 U.S.C.A. sections 2001 et seq., as amended, and with respect to loans made by a bank, trust company or industrial bank to a borrower engaged in the business of farming, crop production or the raising, breeding, fattening or marketing of livestock for the purposes of such business and other requirements of the borrower, the amount of insurance may exceed the unpaid indebtedness but shall not exceed the greater of the loan commitment or the outstanding balance of the loan at the inception of the period for which the borrower is insured; or

(v) with respect to loans made by farm credit banks organized pursuant to the Federal Farm Loan Act, 12 U.S.C.A. sections 2011 et seq., as amended, the amount of insurance on any person insured under the policy shall not at any time exceed the amount of unpaid indebtedness at the inception of the period for which premiums are paid, but is not otherwise limited.

(2) The amount of insurance with respect to any person insured under a policy insuring persons who are tenants or stockholders of a mutual or other housing corporation (organized pursuant to the provisions of the Private Housing Finance Law, as amended, and regulated by such statute as to rent, dividends and profits) issued with identifiable charges or fixed amounts of premiums to such corporation or to a trustee or trustees or agent designated by one or more such corporations may be continued for the term of the tenant's lease with such corporation or 36 months or whichever is the greater period, and the amount of insurance with respect to any person insured under such policy may be a fixed amount not greater than the lesser of any statutory limit and an amount equal to 36 times the monthly installments due under such lease.

(3) Where indebtedness repayable in installments is secured by an individual or group policy of credit life insurance, the amount of insurance shall be written as decreasing term and shall not exceed the greater of the unpaid net indebtedness and the scheduled unpaid net indebtedness on the date of death. Where the initial indebtedness for loans repayable in installments exceeds the maximum amount of insurance as stated or described in the policy, the insurance may be written for either:

(i) the lesser of such maximum and of the indebtedness, provided, that if the scheduled indebtedness exceeds such maximum for more than seven years, then after seven years the amount of insurance may not exceed the ratio of the maximum to the scheduled unpaid net indebtedness at the end of seven years times the greater of the actual unpaid net indebtedness and the scheduled unpaid net indebtedness;

(ii) the greater of the actual unpaid net indebtedness and the scheduled unpaid net indebtedness times the ratio of the maximum to the initial indebtedness; or

(iii) such other amount reasonably consistent with subparagraph (i) or (ii) of this paragraph.

(4) Subject to any maximums in this section or any stated or described in the policy, the amount of credit life insurance shall be written to include the payment of a portion of at least two months of delinquent payments. The portion of delinquent payments covered shall be at least as great as the ratio of the scheduled amount of insurance to the scheduled net unpaid indebtedness. In the case of subparagraph (3)(ii) of this subdivision the appropriate ratio of maximum to initial net indebtedness may be substituted. In the case of co-insurers, the amount of credit life insurance shall be written subject to limits consistent with the above.

(b) The amount of credit accident and health insurance is limited as follows and the amount of indemnity payable with respect to any person insured thereunder shall not at any time exceed:

(1) in all cases except as hereinafter provided the lesser of any statutory limit and the amount due from such person;

(2) in the case of a loan commitment pursuant to a program for defraying the cost of attendance of a student at a college or university or at an elementary or secondary school providing education required for minors, the lesser of any statutory limit and the total of the unpaid balance of the scheduled periodic payments whether due or not due and the amount of any outstanding loan commitment pursuant to such a program; or

(3) in the case of a transaction secured by a real estate mortgage, the lesser of any statutory limit and the amount of the indebtedness so secured.

(c) The term of any credit life insurance or credit accident and health insurance shall, subject to acceptance by the insurer if required, and unless otherwise permitted pursuant to section 185.5(d) of this Part, commence on the date when the debtor becomes obligated to the creditor, except that, where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to such indebtedness, unless otherwise expressly authorized by the superintendent, shall commence on the effective date of the policy. The term of an individual policy of credit life insurance or credit accident and health insurance shall not extend more than 15 days beyond the scheduled maturity date of the indebtedness. If insurance on the life of a debtor is provided under a group policy, the term of such insurance shall not be continued for a period greater than the duration of the indebtedness, and in no event:

(1) in the case of an indebtedness repayable in installments, shall such insurance be continued for a period greater than 35 years from the date the indebtedness is incurred; and

(2) in the case of other indebtedness, shall such insurance be continued for a period in excess of 18 months except that such insurance may be continued for an additional period not exceeding six months in the case of default, extension or recasting of the indebtedness.

Notwithstanding anything to the contrary, the term of insurance in connection with tenant's leases shall be as permitted by sections 4216(b)(3) and 4235(c)(1)(E) of the Insurance Law.

(d) Notwithstanding anything in the preceding subdivisions to the contrary:

(1) the insurance of borrowers, who incur indebtedness arising from the granting of policy loans pursuant to policy provision therefor, provided under a group policy issued to the insurance company granting the policy loan, may be continued for the duration of the indebtedness;

(2) under any plan expressly approved by the superintendent, the insurance of debtors under a group policy with respect to an agreement which does not provide for repayment in installments may be continued for the duration of such indebtedness, but not more than seven years from the date such indebtedness is incurred; and

(3) for loans where the term may be extended due to changes in the loan interest rate, as provided for under the terms of the loan, and where the insurance is written for the full term of the loan, then subject to all other termination provisions, the insurance must be extended along with the loan for a period of at least three months.

(e) 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. For any renewed or refinanced indebtedness, the application of any preexisting condition limitation in the credit life or credit accident and health policy must conform to the requirements in section 185.5(e) of this Part. In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in section 185.8 of this Part.

(f) For loans of 63 months or less, except for termination due to age limits, coverage must be written for the full term of the loan. For loans in excess of 63 months, coverage for less than the full term of the loan may be written, provided that, except for termination due to age limits, the term of insurance is 60 months or more.

(g) An individual policy of credit accident and health insurance by its terms shall not be cancellable by the insurer, except for nonpayment of premium, prior to the earliest of:

(1) the scheduled maturity date of the indebtedness;

(2) the date on which the indebtedness is discharged due to prepayment, refinancing, or renewal; or

(3) the expiration of the longer of the four-year period following the date on which the indebtedness was insured or the period for which the premium has been paid. In the case of a specific loan or other credit transaction of more than four years' duration, this rule shall be applicable to each successive four-year period during which the credit accident and health insurance is renewed or otherwise continued in force.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 185.6