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

A policy issued to a creditor or its parent holding company or to a trustee or agent designated by two or more creditors, which creditor, parent holding company, affiliate, trustee, or agent 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 or creditors, or all of any class or classes of the creditors. The policy may provide that the term debtors shall include borrowers of money or purchasers or lessees of goods, services, or property for which payment is arranged through a credit transaction, 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;

(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 no part of the premiums is to be derived from the funds contributed by insured debtors specifically for their insurance must insure all eligible debtors or all except any as to whom evidence of individual insurability is not satisfactory to the insurer;

(3) The amount of insurance on the life of any debtor shall at no time exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor, except that insurance written in connection with open-end credit having a credit limit exceeding ten thousand dollars may be in an amount not exceeding the credit limit;

(4) The insurance shall be payable to the creditor or any successor to the right, title, and interest of the creditor. The payment shall reduce or extinguish the unpaid indebtedness of the debtor to the extent of such payment, and any excess of the insurance shall be payable to the estate of the insured; and

(5) Notwithstanding subdivisions (1) through (4) of this section, insurance on agricultural credit transaction commitments may be written up to the amount of the loan commitment on a nondecreasing or level-term plan and insurance on educational credit transaction commitments may be written up to the amount of the loan commitment less the amount of any repayments made on the loan.

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