38.2-3724 - Policy provisions; disclosure to debtors; delivery of policy or certificate.
§ 38.2-3724. Policy provisions; disclosure to debtors; delivery of policy orcertificate.
A. Credit life insurance and credit accident and sickness insurance shall beevidenced by an individual policy, or in the case of group insurance by acertificate of insurance. The policy or certificate of insurance shall: (i)be a document separate and apart from the loan or credit agreement, (ii)refer exclusively to the insurance coverage, and (iii) be delivered to thedebtor.
B. Each policy or certificate of credit life insurance or credit accident andsickness insurance shall set forth:
1. The name and address of the insurer;
2. The name or names of the debtor or, in the case of a certificate, theidentity by name or otherwise of the debtor;
3. The age or date of birth of the debtor(s);
4. The premium or amount payable by the debtor separately for credit lifeinsurance and credit accident and sickness insurance;
5. A description of the coverage including the amount and term of thecoverage, and any exceptions, limitations or restrictions;
6. A statement that the benefits shall be paid to the creditor to reduce orextinguish the unpaid indebtedness; and
7. A statement that if the amount of insurance exceeds the amount necessaryto discharge the indebtedness, any such excess shall be payable to abeneficiary, other than the creditor, named by the debtor or to his estate.
C. A credit life or credit accident and sickness insurance policy orcertificate, which provides truncated or critical period coverage or anyother type of similar coverage that does not provide benefits or coverage forthe entire term or amount of the indebtedness, shall be subject to thefollowing requirements:
1. The credit life or credit accident and sickness insurance policy orcertificate shall include a statement printed on the face of the policy orfirst page of the certificate which clearly describes the limited nature ofthe insurance. The statement shall be printed in capital letters and in boldtwelve-point or larger type; and
2. The credit life or credit accident and sickness insurance policy orcertificate shall not include any benefits or coverage other than truncatedor critical period coverage or any other type of similar coverage that doesnot provide benefits or coverage for the entire term or amount of theindebtedness.
D. No individual or group credit life insurance or credit accident andsickness insurance policy shall be delivered or issued for delivery in thisCommonwealth unless the policy complies with the following requirements:
1. Each policy shall contain a provision (i) that the policy, or the policyand any application endorsed upon or attached to the policy when issued,shall constitute the entire contract between the parties, and (ii) that allstatements made by the creditor or by the individual debtors shall, in theabsence of fraud, be deemed representations and not warranties;
2. Each policy shall contain a provision that the validity of the policyshall not be contested, except for nonpayment of premiums, after it has beenin force for two years from its date of issue; and that no statement made byany person insured under the policy relating to his insurability shall beused in contesting the validity of the insurance with respect to which suchstatement was made after the insurance has been in force for a period of twoyears during such person's lifetime, and prior to the date on which the claimthereunder arose;
3. Each policy shall contain a provision that when a claim for the death ordisability of the insured arises, settlement shall be made upon receipt ofdue proof of such death or disability;
4. On the face of each policy and certificate there shall be a title thatbriefly and accurately describes the nature and form of the policy;
5. Each policy and certificate, including any rider or endorsement, shall beidentified by a form number in the lower lefthand corner of the first page ofthe form. The type size of the text of the policy form or certificate,including any rider and endorsement, shall not be less than ten-point type,one-point leaded;
6. Each individual policy or group certificate shall meet the readabilitystandards established by the Commission;
7. Each individual policy and certificate shall have printed on it a noticestating in substance that if, during a period of at least ten days from thedate the policy or certificate is delivered to the policyowner orcertificateholder the policy or certificate is surrendered to the insurer orits agent with a written request for cancellation, the policy or certificateshall be void from the beginning and the insurer shall refund any premiumpaid for the policy or certificate; and
8. Each individual policy or group certificate paid in advance or by a singlepremium shall include a provision, separately and prominently captioned,stating in substance the following:
"REFUND OF PREMIUM IN THE EVENT OF EARLY TERMINATION"
"In the event this insurance policy or certificate is terminated prior toits originally scheduled maturity date, or the insured indebtedness isterminated or paid off earlier than scheduled, the insurer shall, within 30days of receipt of notification from the debtor of such termination or earlypayoff, refund or credit any amount paid by the debtor for the insurancebeyond the actual date of termination or payoff. Early termination of debtincludes termination by renewal or refinancing. The debtor's notification tothe insurer shall include proof of termination or early payoff of the insuredindebtedness."
E. An individual credit life insurance or credit accident and sicknessinsurance policy or certificate of insurance shall be delivered or mailed tothe insured debtor at the time the indebtedness is incurred or within tenbusiness days thereafter except as provided in subsection F of this section.For open-end credit transactions, agricultural or educational loancommitments, or where no direct charge is made to the debtor for hisinsurance, the individual policy or group certificate of insurance may bedelivered to the insured debtor at the time he first becomes eligible for theinsurance and need not be delivered again each time new indebtedness is added.
F. If the individual policy or certificate of insurance is not delivered ormailed to the debtor at the time indebtedness is incurred, or within tenbusiness days thereafter, a notice of proposed insurance, setting forth (i)the name and address of the insurer, (ii) the name or names of the debtor,(iii) the age of the debtor, (iv) the premium or amount of payment by thedebtor, if any, separately for credit life insurance and credit accident andsickness insurance, and (v) the amount, term and a brief description of thecoverage provided, shall be delivered to the debtor. The notice of proposedinsurance shall refer exclusively to insurance coverage and shall be separateand apart from the loan or credit transaction. Upon acceptance of theinsurance by the insurer and within thirty days of the date upon which theindebtedness is incurred, the insurer shall deliver or mail the individualpolicy or group certificate of insurance to the debtor. The notice ofproposed insurance shall state that upon acceptance by the insurer, theinsurance shall become effective as provided in § 38.2-3721.
G. If the policy or certificate is issued by any insurer other than theinsurer listed on the application, enrollment request, or notice of proposedinsurance, the debtor shall receive a policy or certificate of insurancesetting forth the name and address of the substituted insurer and the amountof the premium to be charged. If the amount of the premium is less than thatset forth in the notice of proposed insurance, an appropriate refund shall bemade.
(1960, c. 67, § 38.1-482.6; 1982, c. 223, §§ 38.2-3707, 38.2-3709; 1986, c.562; 1988, c. 551; 1992, c. 586; 2009, c. 643; 2010, c. 211.)