Code Section Group

Financial Code - FIN

DIVISION 7. INDUSTRIAL LOAN COMPANIES [18000 - 18707]

  ( Division 7 repealed and added by Stats. 1976, Ch. 964. )

CHAPTER 3. Loans and Purchased Obligations [18190 - 18303]

  ( Chapter 3 added by Stats. 1976, Ch. 964. )

ARTICLE 6. Insurance Sold With Loans [18290 - 18296]
  ( Article 6 added by Stats. 1976, Ch. 964. )

18290.
  

(a) As used in this division:

(1) “Credit life insurance” and “credit disability insurance” have the same meanings as defined in Section 779.2 of the Insurance Code.

(2) “Credit loss-of-income insurance” means insurance issued to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is involuntarily unemployed, as defined in the policy.

(b) An industrial loan company may provide and collect the costs for credit life insurance on the life of one or more of the borrowers, or credit disability, or loss-of-income insurance, or any combination of these coverages, to provide indemnity for payments becoming due on the indebtedness, with his or her consent, the form to be approved by the Insurance Commissioner, and a copy, together with evidence of its approval by the Insurance Commissioner, to be filed with the commissioner, and in an amount not in excess of the amount of the indebtedness. The amount charged to the borrower for credit life or disability insurance shall not exceed, in the case of credit life insurance, fifty cents ($0.50) per year per one hundred dollars ($100) of indebtedness (and in the same proportion for longer or shorter maturities and larger or smaller amounts) or the amount established by or pursuant to Section 779.35 of the Insurance Code, whichever is less, or, in the case of credit disability insurance, the amount established by or pursuant to Section 779.35 of the Insurance Code.

(Amended by Stats. 1987, Ch. 1314, Sec. 1.)

18291.
  

(a) If credit life or disability insurance is provided pursuant to this division, and if the insured borrower dies or becomes disabled during the term of the loan contract, the insurance shall be sufficient to pay the total amount due on the loan (excluding unearned charges) outstanding on the date of death, or all amounts which become due on the loan thereafter during the period of disability, as the case may be, without any exception, reservation, or limitation, subject, however, to the provisions of Section 18292.

(b) Any credit life, disability, or loss-of-income insurance as provided shall be in force as soon as the loan is made. An industrial loan company shall not require any of these coverages as a condition of making a loan.

(Amended by Stats. 1986, Ch. 813, Sec. 2.)

18292.
  

(a) If credit disability insurance is provided pursuant to this division, it shall not provide indemnity against the risk of a borrower becoming disabled for a period of less than 14 days. The insurance may provide indemnity for any single period of continuous disability of 14 days or longer, after which the risk may become compensable. The insurance may be offered with retroactive coverage to an earlier date based upon the disability having continued for a period stated in the policy, but if insurance with retroactive coverage is offered, it shall also be offered without retroactive coverage, and the premium rate for each coverage shall be separately stated in writing to the borrower.

(b) If insurance with retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is disabled, provided that the insured is continuously disabled during the waiting period set forth in the policy. If insurance without retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is disabled, after first excluding the elimination period set forth in the policy. For the purpose of this subdivision, a month is any period of 30 consecutive days.

(c) Credit disability insurance, if made available by an industrial loan company, shall be available on a monthly or annual premium basis, and the premium by the month shall not exceed a pro rata relationship to the annual premium. Credit disability insurance need not be offered for a period less than the term of the loan to which it is applicable and no credit disability insurance shall be written for a period in excess of the term of the loan to which it is applicable.

(d) The monthly disability benefit payable with respect to an open end loan shall not exceed the monthly payment computed pursuant to Section 18300 on the outstanding balance at the time the disability is incurred.

(Amended by Stats. 1984, Ch. 199, Sec. 3.)

18292.5.
  

If credit loss-of-income insurance is provided pursuant to this division, it shall be subject to the following conditions:

(a) The insurance shall provide indemnity in accordance with the terms of the policy after any single period of continuous unemployment of 45 days or less as determined by the policy, after which benefits shall commence. The insurance may be offered with retroactive coverage to an earlier date based upon unemployment having continued for the period stated in the policy.

(b) The statement required by Section 18293 shall include disclosure of the term of the coverage, the conditions of coverage, the benefits to be paid, and the exclusions from coverage.

(c) The borrower shall sign a certificate of voluntary acceptance of any credit loss-of-income insurance purchased. The certificate shall state in boldface type which is larger than the type used in the loan contract that purchase of the insurance is not a necessary condition to receiving the loan and that the insurance may be canceled by the borrower at any time within 15 days after it goes into force, in which event a full refund shall be made of the premium paid.

(d) The minimum benefit shall be payment up to the agreed amount on not less than four benefit payments, as stated in the policy, which accrue during a covered period of unemployment, except that during the first 60 days after inception of the policy, the minimum benefit may be payment up to the agreed amount of one-half the number of benefit payments, as stated in the policy, which accrue during a covered period of unemployment. The maximum benefits shall be established in the contract of insurance.

(e) If combination credit disability and loss-of-income coverage is offered, credit disability and credit loss-of-income coverages shall also be offered separately.

(f) Benefits may not be denied because the insured cannot establish a valid claim for unemployment compensation benefits under Part 1 (commencing with Section 100) of Division 1 of the Unemployment Insurance Code solely because the former employer was not required to contribute to the State Unemployment Fund.

(g) If insurance with retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is unemployed, provided that the insured is continuously unemployed during the waiting period set forth in the policy. If insurance without retroactive coverage is provided, the coverage shall provide for a prorated payment based upon the fraction of the month during which the insured is unemployed, after first excluding the elimination period set forth in the policy. For the purpose of this subdivision, a month is any period of 30 consecutive days.

(h) When unemployment continues for a number of months equal to or greater than the maximum number of benefit payments stated in the policy, the final payment shall be equal to the difference between a benefit payment and the initial prorated payment.

(i) As used in this section, “benefit payment” means payment of an amount equal to a loan repayment installment or a maximum amount established in the contract of insurance, whichever is less.

(j)  The minimum benefit payment offered may not be less than the amount of a loan repayment installment unless the borrower or borrowers have two or more sources of income. If the maximum benefit payment offered is less than the amount of a loan repayment installment, the borrower shall also be offered coverage in which the maximum benefit payment is equal to the amount of a loan repayment installment.

(Amended by Stats. 1987, Ch. 1314, Sec. 2.)

18293.
  

If credit disability or loss-of-income insurance is provided pursuant to this division, the industrial loan company shall also deliver an understandable written statement to the borrower detailing the conditions when the borrower will be entitled to make a claim under the insurance policy and the procedure to be followed in making the claim.

(Amended by Stats. 1998, Ch. 827, Sec. 13. Effective January 1, 1999.)

18294.
  

An industrial loan company may collect the costs for insurance of tangible personal or real property offered as security for a loan, reasonably insured against loss for a reasonable term considering the circumstances of the loan, when the policy of insurance is made payable to the borrower or any member of his family, even though the customary mortgagee clause is attached, and if the insurance is sold at standard rates through duly licensed insurance agents.

(Added by Stats. 1976, Ch. 964.)

18295.
  

An industrial loan company may collect the costs of title insurance for loans secured primarily by real property. The costs for such insurance may be collected if:

(1) The principal amount of the loan is at least one thousand dollars ($1,000);

(2) The loan is secured by a lien of a deed of trust or mortgage on real property which is the subject of such policy of title insurance;

(3) The policy of title insurance is made payable to the lender or jointly to such lender and the borrower as their interests may appear;

(4) The coverage of such insurance may not exceed the lesser of the principal amount of the loan or the fair market value of the real property less prior encumbrances;

(5) The insurance is placed at standard rates through a title insurance company authorized to do business in the State of California;

(6) In connection with the renewal or extension of a loan, the additional cash advance is at least one thousand dollars ($1,000).

Such costs as herein authorized are not included in the maximum charges which may be made under this division.

(Amended by Stats. 1983, Ch. 858, Sec. 24.)

18296.
  

An industrial loan company may collect the costs of insurance of the type defined by subdivision (a) of Section 12640.02 of the Insurance Code. Costs authorized by this section are not included in the maximum charges which may be made under this division.

(Added by Stats. 1984, Ch. 199, Sec. 4.)

FINFinancial Code - FIN6.