636

LAWS OF MARYLAND

Ch. 203

or more subsidiary corporations, and the debtors of one or more
affiliated corporations, proprietors or partnerships if the
business of the policyholder and of such affiliated corporations,
proprietors or partnerships is under common control. No debtor
shall be eligible unless the indebtedness constitutes an
irrevocable obligation to repay which is binding upon him during
his lifetime, at and from the date the insurance becomes
effective upon his life.

(2)  The premium for the policy shall be paid by the
policyholder, either from the creditor's funds, or from charges
collected from the insured debtors, or from both. A policy on
which part or all of the premium is to be derived from the
collection from the insured debtors of identifiable charges not
required of uninsured debtors shall not include, in the class or
classes of debtors eligible for insurance, debtors under
obligations outstanding at its date of issue without evidence of
individual insurability unless at least seventy-five percent of
the then eligible debtors elect to pay the required charges. A
policy on which no part of the premium is to be derived from the
collection of such identifiable charges must insure all eligible
debtors, or all except any as to whom evidence of individual
insurability is not satisfactory to the insurer.

(3)  The policy may be issued only if the group of
eligible debtors is then receiving new entrants at the rate of at
least one hundred (100) persons yearly, or may reasonably be
expected to receive at least one hundred new entrants during the
first policy year, and only if the policy reserves to the insurer
the right to require evidence of individual insurability if less
than seventy-five percent (75%) of the new entrants become
insured. The policy may exclude from the classes eligible for
insurance classes of debtors determined by age.

(4)  The amount of insurance on the life of any debtor
shall at no time exceed the amount owed by him to the creditor,
or [twenty-five thousand dollars ($25,000)] $50,000, whichever is
less. Where the indebtedness is repayable in one sum to the
creditor, the insurance on the life of any debtor shall in no
instance be in effect for a period in excess of eighteen months,
except that such insurance may be continued for an additional
period not exceeding six months in the case of default, extension
or recasting of the loan.

(5)  The insurance shall be payable to the
policyholder. Such payment shall reduce or extinguish the unpaid
indebtedness of the debtor to the extent of such payment.

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall
take effect July 1, 1984.

Approved May 8, 1984.