                                 CODE OF VIRGINIA

DISCLOSURE AND READABILITY (§ 38.2-3735)

A. If a creditor makes available to the debtors more than one plan of credit
life insurance or more than one plan of credit accident and sickness insurance,
all debtors must be informed of all such plans for which they are eligible. In
the case of credit life insurance:

   1. If a creditor offers a plan of insurance that insures the actual amount of
   unpaid indebtedness, the creditor shall also offer to the debtor a plan of
   insurance that insures only the actual amount of indebtedness less any
   unearned interest or finance charges; and

   2. In the event that a plan of insurance that insures the actual amount of
   unpaid indebtedness is offered, the creditor shall provide to each debtor a
   disclosure form which shall clearly disclose the difference in premiums
   charged for a contract wherein the gross indebtedness is insured versus a
   contract wherein only the net indebtedness is insured. This disclosure shall
   include the differences between the amount financed, the monthly payment and
   the total charge for each type of insurance. The form shall be signed and
   dated by the debtor and the agent, if any, soliciting the application or the
   creditor&#8217;s representative, if any, soliciting the enrollment request. A
   copy of this disclosure shall be given to the debtor, and a copy shall be made
   a part of the creditor&#8217;s loan file.
   				Nothing contained in this subsection shall be construed to prohibit the
   creditor from combining such disclosure, in order to avoid redundancy, with
   other forms of disclosure required under state or federal law.

B. When elective credit insurance is offered, the borrower must be given written
disclosure that purchase of credit insurance is not required and is not a factor
in granting credit. The disclosure shall also include notice that the borrower
has the right to use alternative coverage or to buy insurance elsewhere.

C. If the debtor is given a contract which includes a single premium payment to
be charged for elective credit insurance, the debtor must be given:

   1. A contract which does not include the elective credit insurance premium; or

   2. A disclosure form which shall clearly disclose the difference in premiums
   charged for a contract with credit insurance and one without credit insurance.
   This disclosure shall include the difference between the amount financed, the
   monthly payment and the charge for each kind of insurance. The form shall be
   signed and dated by the debtor and the agent, if any, soliciting the
   application or the creditor&#8217;s representative, if any, soliciting the
   enrollment request. A copy of this disclosure shall be given to the debtor and
   a copy shall be made a part of the creditor&#8217;s loan file.
   				Nothing contained in this subsection shall be construed to prohibit the
   creditor from combining such disclosure, in order to avoid redundancy, with
   other forms of disclosure required under state or federal law.

D. If credit life insurance or credit accident and sickness insurance is
required as security for any indebtedness, the debtor shall have the option of
(i) furnishing the required amount of insurance through existing policies of
insurance owned or controlled by him or (ii) procuring and furnishing the
required coverage through any insurer authorized to transact insurance in this
Commonwealth. The creditor shall inform the debtor of this option in writing and
shall obtain the debtor&#8217;s signature acknowledging that he understands this
option. Nothing contained in this subsection shall be construed to prohibit the
creditor from combining such disclosure, in order to avoid redundancy, with
other forms of disclosure required under state or federal law.

E. No contract of insurance upon a debtor paid in advance or by a single premium
shall be made or effectuated unless, at the time of the contract, the debtor is
provided with a notice prominently disclosing his rights to a refund of premium
in the event the insurance is terminated prior to its scheduled maturity date or
the insured indebtedness is terminated or paid off early, and of the obligation
of the debtor to provide notification to the insurer under subdivision D 8 of
&#xA7; 38.2-3724. This notice shall be signed and dated by the debtor and the
agent, if any, soliciting the application or the creditor&#8217;s
representative, if any, soliciting the enrollment request. A copy of the signed
notice shall be given to the debtor and a copy shall be made part of the
insurer&#8217;s file.
			F.&#xA0;Readability. &#8212; The Commission shall not approve any form unless
the policy or certificate is written in nontechnical, readily understandable
language, using words of common everyday usage.
			A form shall be deemed acceptable under this section if the insurer certifies
that the form achieves a Flesch Readability Score of forty or more, using the
Flesch Readability Formula as set forth in Rudolf Flesch, The Art of Readable
Writing (1949, as revised 1974), and certifies compliance with the guidelines
set forth in this section.

HISTORY: 1992, c. 586; 1999, c. 586; 2009, c. 643; 2010, c. 211.