§5-19-20. Insurance.

(a) With respect to any consumer credit transaction, the creditor shall not require any insurance other than insurance against loss of or damage to any property in which the creditor is given a security interest and insurance insuring the lien of the creditor on the property which is collateral for the transaction.

(b) (1) Credit life and disability and involuntary unemployment insurance may be offered and, if accepted, may be provided by the creditor. The charge to the debtor for the insurance shall not exceed the premium permitted for the coverages. Insurance with respect to any credit transaction shall not exceed the approximate amount and term of the credit.

(2) This subdivision (2) applies to all consumer credit transactions entered into on or after June 19, 1996. If the consumer credit transaction is scheduled to be repaid in substantially equal installments which include a portion of the amount financed, the amount of credit life insurance at any time shall not exceed the greater of the approximate unpaid balance of the debt, excluding unearned finance charges, if any, or the approximate unpaid scheduled balance of the debt, excluding unearned finance charges, if any, plus the amount of one scheduled payment. The amount of credit life insurance on single payment consumer credit transactions and the amount of accident and health insurance and involuntary unemployment insurance shall not exceed the approximate amount of the total of payments. The amount of credit life insurance under an open-end credit plan shall not exceed the approximate unpaid balance of the debt from time to time. The debtor's estate or a named beneficiary shall be entitled to any excess credit life insurance benefit.

(c) If the debtor fails to provide any required property insurance, the creditor may, but is not required to, purchase insurance insuring its interest only, or with the debtor's written consent, insuring both the creditor's interest and the debtor's interest, and the premium for the property insurance together with interest on the premium at the contract rate or other rate agreed to in writing may be charged by the creditor to the debtor. The premium charged to the debtor for any insurance shall not exceed the premium approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance for the insurance, as applicable. If the insurance insures only the creditor's interest in the property, the term of the insurance provided pursuant to this subsection shall not exceed the approximate remaining term of the credit, and the amount of insurance shall not exceed the approximate amount of the unpaid balance of the debt excluding unearned finance charges, if any. The administrator may promulgate regulations pursuant to Section 5-19-21 to provide further for the term and maximum permissible amount of insurance which covers the creditor's interest in the property.

(d) The premium for nonfiling insurance, insuring the lien of the creditor on any property which is collateral for the consumer credit transaction, may not exceed the cost of filing of a lien on the property and any document necessary to continue the lien and is nonrefundable. The insurance may be required in both purchase money and nonpurchase money secured transactions. A creditor may not charge a debtor the cost of filing the lien and a premium for nonfiling insurance in a consumer credit transaction.

(e) If a creditor requires any insurance against loss of or damage to any property in which the creditor is given a security interest, the debtor shall have and be given written notice of the option of obtaining the insurance through a person of the debtor's choice. If the debtor does not exercise the option of providing the insurance through an existing policy or a policy independently obtained and paid for by the debtor, the creditor may purchase the insurance on the property and charge the premium for the insurance to the debtor. The premium or premiums charged for such required insurance shall not exceed the premium approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance, as applicable. The creditor may, for reasonable cause, decline the insurance provided by the debtor.

(f) When property insurance, as permitted herein, is required by the creditor, is not furnished by the debtor, and is purchased by the creditor, then upon renewal, refinancing, or payment of the debt before the final maturity date, the creditor shall refund or credit the debtor with that portion of the premium refunded by the insurance carrier upon the termination of the insurance.

(g) A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property or against liability for property damage or personal injuries unless the original amount financed exclusive of the charges for insurance is three hundred dollars ($300) or more and the value of the property is three hundred dollars ($300) or more.

(h) In no event shall the creditor have any responsibility or liability for the failure to purchase any insurance permitted by this section unless the creditor has affirmatively undertaken in writing to purchase the insurance.

(i) A creditor may offer and finance any other insurance in connection with any consumer credit transaction upon such terms as are authorized by regulation of the administrator.

(Acts 1971, No. 2052, p. 3290, §16; Acts 1986, No. 86-304, p. 451, §3; Acts 1987, No. 87-766, p. 1494; Acts 1996, No. 96-576, p. 887, §2.)