(1) Premiums for creditor-placed insurance coverage may be calculated based on 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 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.
  (2) 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.

Terms Used In Michigan Laws 500.1609

  • Actual cash value: means the cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. See Michigan Laws 500.1605
  • Commissioner: means the director. See Michigan Laws 500.102
  • Credit agreement: means the written document that sets forth the terms of the credit transaction and includes the security agreement. See Michigan Laws 500.1605
  • 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 Michigan Laws 500.1605
  • 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 Michigan Laws 500.1605
  • 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 Michigan Laws 500.1605
  • Insurer: means an individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds organization, fraternal benefit society, or other legal entity, engaged or attempting to engage in the business of making insurance or surety contracts. See Michigan Laws 500.106
  • 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 Michigan Laws 500.1605
  • Rate: means the cost of insurance per payroll before adjustment for an individual insured's size, exposure, or loss experience. See Michigan Laws 500.2402
  (3) 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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