Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
Premium finance agreement: means an agreement by which an insured or prospective insured promises to pay to a premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or producing agent in payment of premiums of an insurance contract, together with interest and a service charge as authorized and limited by this chapter. See Tennessee Code 56-37-102
Premium finance company: means a person engaged in the business of entering into premium finance agreements or acquiring premium finance agreements from other premium finance companies. See Tennessee Code 56-37-102
(b) The interest is to be computed on the balance of the premiums due, after subtracting the down payment made by the insured in accordance with the premium finance agreement, from the effective date of the insurance contract, for which the premiums are being advanced, to and including the date when the final installment of the premium finance agreement is payable.(c) The maximum effective rate of interest under this chapter shall:
(1) Be determined in accordance with the actuarial method;(2) In the case of precomputed interest, be calculated and determined as of the effective date of the insurance contract on the assumption that all scheduled payments will be made as contracted; and(3) Not be affected by the prepayment of the loan, in whole or in part.(d) The maximum effective rate of interest per annum under this chapter shall not exceed twenty-four percent (24%) per annum.(e) The term of a loan for the purposes of this section commences on the effective date of the insurance contract for which the premium is being advanced. Differences in the lengths of months are disregarded and, for any period less than a month, each day may be counted as one thirtieth (1/30) of a month.(f) Notwithstanding any premium finance agreement, any insured may prepay the obligation in full at any time. In this event, the insured shall receive a refund credit, which refund credit shall represent at least as great a proportion of the interest as the sum of the periodic balances after the month in which prepayment is made bears to the sum of all periodic balances under the schedules of installments in the agreement. Where the amount of the refund credit is less than one dollar ($1.00), no refund need be made.
