SECTION 3.5501. Standards and Principles for the Application of the Rates

The standards and principles for the application of presumptive rates established for credit accident and health insurance are as follows.

(1) The initial amount of insured indebtedness to which the rate is applied shall not exceed the aggregate of the insured portion of the periodic scheduled unpaid installments of the indebtedness.

(2) The indebtedness must be repayable in substantially equal monthly or other periodic installments during the period of coverage.

(3) The credit accident and health insurance contract may require written and signed evidence of insurability (inclusive of age and gainful employment) and where offered, shall be offered to all eligible debtors, and shall contain:

(A) no provisions excluding or denying a claim for disability resulting form pre-existing conditions except for those conditions for which the insured debtor received medical diagnosis or treatment within the six months immediately preceding the effective date of the debtor's coverage and which caused a period of loss within six months following the effective date of coverage; provided, however, that any subsequent period of disability resulting from such condition that commences or recommences more than six months after the effective date of the coverage shall be covered under the provision of the policy;

(B) no provision for validity of insurance more restrictive than contestability based on material misrepresentation and no other provision which excludes or restricts liability in the event of disability caused in a specified manner except that it may contain provisions excluding or restricting coverage in the event of:

(i) elective abortion;

(ii) normal pregnancy;

(iii) intentionally self-inflicted injuries;

(iv) flight in nonscheduled aircraft;

(v) foreign travel or foreign residence; and

(vi) loss resulting from war or military service. An insurer may not rely on material misrepresentation as a defense against the payment of a claim unless the insurer required the insured to sign a written statement in which the alleged material misrepresentation was made;

(C) only age restrictions making ineligible for coverage debtors 65 or over at the time the indebtedness is incurred or debtors who will have attained age 66 or over on the maturity date of the indebtedness;

(D) provision for a daily benefit equal in amount to 1/30 (or other applicable fraction) of the scheduled monthly (or other specified mode of installment) payments on the indebtedness; and

(E) for the purpose of total disability insurance, a definition of "total disability" which provides coverage during the first 12 months of such disability even though the insured is able to perform an occupation other than the one he held at the time such disability occurred. During the first 12 months of such disability, the definition of "total disability" must relate such disability to the inability to perform the essential and customary duties of the occupation of the debtor at the time the disability occurred. After such disability continues for more than 12 months, the definition of "total disability" may relate such continuing disability to the inability to perform any occupation for which the debtor is reasonably fitted by education, training, or experience.

Source Note: The provisions of this §3.5501 adopted to be effective October 1, 1980, 5 TexReg 2772; amended to be effective June 30, 1992, 17 TexReg 4345.