SECTION 3.5104. Benefits and Refunds

(a) Refunds will be due as follows.

(1) If an accident and health insurance claim is in progress at the time of discharge of the indebtedness, such claim shall continue during the originally scheduled term of insurance, as if there had been no such discharge of indebtedness. Upon the termination of such continuing claim within the originally scheduled term of insurance, a refund shall be made of any then unearned premium. If, however, the indebtedness is prepaid by a lump sum disability benefit or if the insurer elects, during the pendency of an accident and health insurance claim, to prepay and discharge the full remaining balance due thereon immediately in one payment, the accident and health premium paid or then due and payable to the insurer is earned and no refund is required. However, in such instances, the credit life premium is not fully deemed earned and shall be refunded in accordance with §§3.5901-3.5906 of this title (relating to Premium Refunds).

(2) In the case of termination of credit life insurance for all plans in which death benefits are not payable due to exclusions in the policy, except for open-end coverages, the insurer will refund the gross premium paid for credit life insurance and the unearned credit accident and health premium in accordance with §§3.5901-3.5906 of this title (relating to Premium Refunds). For open-end coverages, the insurer will refund the total amount of credit life premium charged or collected since the date of death along with the unearned credit accident and health premium in accordance with §§3.5901-3.5906 of this title.

(3) In the case of termination of credit life insurance by payment of death benefits, the life insurance premiums paid or then due and payable to the insurer are deemed earned and no refund thereof is required; however, in such instances the credit accident and health insurance premium is not fully deemed earned and shall be refunded to the second beneficiary in accordance with §§3.5901-3.5906 of this title (relating to Premium Refunds).

(b) Excess benefits checks or drafts made in accordance with policies previously set out in §3.5103(8) of this title (relating to Policy Provisions) shall be delivered only by the insurer or, at the option of the insurer, by the creditor.

(c) The creditor agent or group policyholder shall not require that any benefit be applied to the reduction of any indebtedness other than the indebtedness in connection with which the insurance was written.

(d) Notice of payment of benefits under credit life insurance shall be provided to the insured's estate. The insured shall be provided notice of initiation of benefits under a credit accident and health insurance policy along with a statement that such benefits will continue while the insured is disabled under the terms of the insurance policy. The insurer shall be responsible for such notice; however, such duty may be delegated to the creditor provided the insurer audits that account annually to assure these notice requirements are met.

Source Note: The provisions of this §3.5104 adopted to be effective October 1, 1980, 5 TexReg 2772; amended to be effective June 30, 1992, 17 TexReg 4345.