(a) Premiums for creditor-placed insurance coverage may be calculated based on:

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Terms Used In Tennessee Code 56-49-105

  • Commissioner: means the commissioner of commerce and insurance. See Tennessee Code 56-49-103
  • Credit agreement: means the written document that sets forth the terms of the credit transaction and includes the security agreement. See Tennessee Code 56-49-103
  • Credit transaction: means a transaction by the terms of which the repayment of money loaned or credit commitment made, or payment of goods, services or properties sold or leased, is to be made at a future date or dates. See Tennessee Code 56-49-103
  • Creditor-placed insurance: means insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss, expense or damage to collateralized personal property as a result of fire, theft, collision or other risks of loss that would either impair a creditor's interest or adversely affect the value of collateral covered by limited dual interest insurance. See Tennessee Code 56-49-103
  • Debtor: means the borrower of money or a purchaser or lessee of goods, services, property, rights or privileges, for which payment is arranged through a credit transaction. See Tennessee Code 56-49-103
  • Insurer: means an insurance company, association or exchange authorized to issue insurance policies in this state. See Tennessee Code 56-49-103
  • Net debt: means the amount necessary to liquidate the remaining debt in a single lump-sum payment, excluding all unearned interest and other unearned charges. See Tennessee Code 56-49-103
(1) An amount not exceeding the net debt even though the coverage may limit the insurer‘s liability to the net debt, actual cash value or cost of repair; or
(2) Other premium calculation methods that more closely reflect the exposure of each item insured and approximate the premium calculation method of the coverage required by the credit agreement.
(b) An insurer shall not write creditor-placed insurance for which the premium rate differs from that determined by the schedules of the insurer on file with the commissioner. The premium or amount charged to the debtor for creditor-placed insurance shall not exceed the premiums charged by the insurer, computed at the time the charge to the debtor is determined.
(c) A method of billing insurance charges to the debtor on closed-end credit transactions that creates a balloon payment at the end of the credit transaction or extends the credit transaction’s maturity date is prohibited, unless specifically disclosed at the time of the origination of the credit agreement and specifically agreed to by the debtor at the time the charge is added to the outstanding credit balance.
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