Audit and Accounting Guide - Depository and Lending Institutions

Chapter 22 Insurance Activities

Gray shaded text in this chapter reflects guidance issued but not yet effective as of the date of this guide, July 1, 2018, but becoming effective on or prior to December 31, 2018, exclusive of any option to early adopt ahead of the mandatory effective date. Unless otherwise indicated, all unshaded text reflects guidance that was already effective as of the date of this guide.

Introduction

22.01 Insurance operations ordinarily are an integral part of consumer finance activities. This chapter deals primarily with insurance business generated from finance customers, though it also addresses insurance coverage provided to others who are not also finance customers.

Types of Insurance Coverage

22.02 Insurance activities of finance companies often involve insuring risks related to loan transactions. Following are the three general types of insurance coverage associated with those transactions:

a.     Credit life coverage for loan repayment in the event of the debtor's death

b.     Credit accident and health coverage for installment loan payments in the event of the debtor's illness or disability for an extended period

c.     Property and liability coverage on collateral or other property associated with the loan transaction

Credit Life

22.03 Credit life insurance is a form of term insurance that provides for loan repayment if the debtor dies before the loan is fully paid. It ordinarily is written on a single-premium basis, with the amount of ...