The lives of a group of individuals may be insured under a policy issued to a creditor, who shall be considered the policyholder, to insure the debtors of the creditor, 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 18 months from the initial date of the debt, or all of any class or classes of them determined by conditions pertaining to the indebtedness or the purchase giving rise to the indebtedness; the policy may provide that the term “debtors” includes the debtors of one or more subsidiary corporations, and the debtors of one or more affiliated corporations, proprietors, or partnerships if the business of the policyholder and of the affiliated corporations, proprietors, or partnerships is under common control;

(2) the premium for the policy shall be paid by the policyholder, either from the creditor's funds or 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 may 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 75 percent of the then eligible debtors elect to pay the required charges; a policy on which no part of the premium is to be derived from the collection of the identifiable charges must insure all eligible debtors, or all except those whose evidence of individual insurability is not satisfactory to the insurer;

(3) the policy may be issued only if the group of eligible debtors is then receiving new entrants at the rate of at least 100 persons yearly, or may reasonably be expected to receive at least 100 new entrants during the first policy year, and only if the policy reserves to the insurer the right to require evidence of individual insurability if less than 75 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 a debtor may at no time exceed the amount owed by the debtor to the creditor; if the insurance is in connection with an educational credit transaction commitment, the amount owed by the debtor to the creditor may be considered to include the portion of the educational loan commitment that has not been advanced by the creditor; if the indebtedness is repayable in one sum to the creditor, the insurance on the life of a debtor may in no instance be in effect for a period in excess of 18 months, except that the insurance may be continued for an additional period not exceeding six months in the case of default, extension, or recasting of the loan;

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