2006 Nebraska Revised Statutes - § 44-1603 — Life insurance; policy issued to creditor; requirements.

Section 44-1603
Life insurance; policy issued to creditor; requirements.

A policy issued to a creditor, who shall be deemed the policyholder, to insure debtors of the creditor shall be subject to the following requirements:

(1) The debtors eligible for insurance under the policy shall be all of the debtors of the creditor whose indebtedness is repayable either (a) in installments or (b) in one sum at the end of a period not in excess of eighteen months from the initial date of the debt, or all of any class or classes thereof determined by conditions pertaining to the indebtedness or to the purchase giving rise to the indebtedness. The policy may provide that the term debtors shall include the debtors of one or more subsidiary corporations and the debtors of one or more affiliated corporations, proprietors, partnerships, or limited liability companies if the business of the policyholder and of such affiliated corporations, proprietors, partnerships, or limited liability companies is under common control through stock ownership, contract, or otherwise. No debtor shall be eligible unless the indebtedness constitutes an irrevocable obligation to repay which is binding upon him or her during his or her lifetime, at and from the date the insurance becomes effective upon his or her life;

(2) The premium for the policy shall be paid by the policyholder from the creditor's funds, from charges collected from the insured debtors, or from both. A policy on which part or all of the premium is to be derived from the collection from the insured debtors of identifiable charges not required of uninsured debtors shall not include, in the class or classes of debtors eligible for insurance, debtors under obligations outstanding at its date of issue without evidence of individual insurability unless at least seventy-five percent of the then eligible debtors elect to pay the required charges. A policy on which no part of the premiums is to be derived from the collection of such identifiable charges must insure all eligible debtors or all except any as to whom evidence of individual insurability is not satisfactory to the insurer;

(3) The policy may be issued (a) only if the group of eligible debtors is then receiving new entrants at the rate of at least one hundred persons yearly or may reasonably be expected to receive at least one hundred new entrants during the first policy year and (b) only if the policy reserves to the insurer the right to require evidence of individual insurability if less than seventy-five percent of the new entrants become insured. The policy may exclude from the classes eligible for insurance classes of debtors determined by age;

(4) The amount of insurance on the life of any debtor shall at no time exceed the amount owed by such debtor which is repayable in installments to the creditor. Where the indebtedness is repayable in one sum to the creditor, the insurance on the life of any debtor shall in no instance be in effect for a period in excess of eighteen months, except that such insurance may be continued for an additional period not exceeding six months in the case of default, extension, or recasting of the loan. The amount of the insurance on the life of any debtor shall at no time exceed the amount of the unpaid indebtedness; and

(5) The insurance shall be payable to the policyholder and such payment shall reduce or extinguish the unpaid indebtedness of the debtor to the extent of such payment.

Source:

Laws 1949, c. 150, § 1(2), p. 378

Laws 1955, c. 180, § 1, p. 508

Laws 1957, c. 192, § 2, p. 671

Laws 1967, c. 273, § 1, p. 737

Laws 1974, LB 944, § 1

Laws 1993, LB 121, § 234

~Reissue Revised Statutes of Nebraska