20-1253. Debtor groups
The lives of a group of individuals may be insured under a policy issued to a
creditor, who shall be deemed the policyholder, to insure 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 in installments, 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 or partnerships if the business of the
policyholder and of such affiliated corporations, proprietors or partnerships is under
common control through stock ownership, contract or otherwise.
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 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 per cent 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 such identifiable charges shall 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 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
only if the policy reserves to the insurer the right to require evidence of individual
insurability if less than seventy-five per cent of the new entrants become insured.
4. The amount of insurance on the life of any debtor shall at no time exceed the
amount of the unpaid indebtedness.
5. The insurance shall be payable to the policyholder. Such payment shall reduce
or extinguish the unpaid indebtedness of the debtor to the extent of such payment.
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