N.J. Admin. Code § 11:2-3.9

Current through Register Vol. 56, No. 9, May 6, 2024

Section 11:2-3.9 - Open-end credit coverage

(a) Credit life and credit accident and health insurance may be issued in connection with open-end debts such as credit card transactions.

(b) The following requirements apply to the amount of credit life and credit accident and health insurance issued in connection with open-end debts:

1. Credit life insurance shall cover the amount which the debtor is obligated to pay on the date of death, subject to any policy maximum uniformly applied and any statutory maximum. The amount of insurance shall include all credit drawn at the date of death, regardless of whether it is recorded on the creditor's books, and any accrued interest not yet paid.

2. The periodic payments for credit accident and health insurance shall not be less than the creditor's minimum repayment schedule based on the balance on the date of disability, subject to any policy maximum uniformly applied. Payments shall continue while the debtor is disabled until the account balance on the date of disability, and interest accrued thereon, has been or would have been paid off.

3. Existing draw-downs of credit may or may not be covered. The policy or certificate shall clearly indicate whether or not existing draw-downs of credit are covered. A company may impose additional underwriting to extend insurance to existing draw-downs of credit.

(c) The following requirements apply for premiums or charges for credit life and credit accident and health insurance issued in connection with open-end debts:

1. Credit life insurance premiums or charges for a period shall be based on the coverage provided during that period. Premiums shall therefore be calculated and charged in arrears, consistent with the method by which finance charges are calculated. Generally, such charges should be based on the average daily balance, beginning balance or ending balance A premium may not be charged for coverage in a subsequent period based upon the amount of debt in a previous period.

2. Premium rates for credit accident and health insurance shall be calculated in a manner that is consistent with the benefit provided.

3. The insurer shall file premium rates for credit accident and health insurance in connection with open-end debts that are appropriate for each schedule of minimum benefits that the insurer intends to cover. If changes occur, the insurer shall amend the certificate, or, if all rates are shown in the certificate, modify the charge appropriately.

(d) Notwithstanding the provisions of 11:4-41.7(a) or any other provision of the New Jersey Administrative Code, a preexisting condition exclusion may be applied to credit life insurance and credit accident and health insurance issued in connection with open-end debts.

1. No preexisting condition exclusion shall be applied to any amount of insurance for which the effective date of coverage is within six months immediately following the date of submission by the insured debtor of required evidence of insurability.

2. A preexisting condition exclusion may not be more restrictive than a provision that excludes benefits for death or disability due to conditions for which the insured debtor received medical diagnosis or treatment within six months before the effective date of coverage and from which death occurs or disability commences six months after the effective date of coverage.

3. For credit life insurance, a preexisting condition exclusion shall apply only if and to the extent that the amount of credit life insurance for which the effective date of coverage is within six months before the date of death exceeds the greater of $ 1,000 or the outstanding balance in the billing period in the month immediately prior to the date of the advance.

4. A preexisting condition exclusion may apply separately to each new indebtedness incurred by the debtor and shall not be reapplied to the total indebtedness each time a new indebtedness is incurred. The effective date of coverage for each part of the insurance attributable to a different advance or charge to the plan account is the date on which the advance or charge occurs.

(e) With respect to insurance on credit card or charge account balances solicited through the mail, the notice requirement of N.J.S.A. 17B:29-6d may be satisfied by a tear-off notice affixed to the application.

N.J. Admin. Code § 11:2-3.9

New Rule, R.1996 d.206, effective 5/20/1996.
See: 27 N.J.R. 3676(a), 28 N.J.R. 2621(a).
Former section, "Filing", recodified to 11:2-3.14.
Amended by R.1998 d.41, effective 1/5/1998 (operative July 7, 1998).
See: 29 N.J.R. 2777(a), 30 N.J.R. 235(a).
In (d), added "issued in connection with open-ended debts" at the end of the introductory paragraph.