Bill Analysis
House Bill 3938 would amend Chapter 342 of the Finance Code related to consumer loans, and more specifically Subchapter I regarding insurance, to provide that on a loan made under this chapter and subject to Subchapter E related to interest charges on non-real property loans, a lender, through a licensed insurance agent, could offer a borrower single premium life insurance.
The lender would not be allowed to require that the borrower accept it and the lender would have to provide that the borrower either pay the insurance premium from the borrower's own funds or with a portion of the loan proceeds.
House Bill 3938 would amend Section 342.407 regarding the requirements for including an insurance charge in contracts to add that the loan contract would have to be written, in additional to existing requirements, through an insurance agent licensed in accordance with the Insurance Code if the charge is included with the single premium life insurance.
House Bill 3938 would except the sale of a single premium term life insurance policy under Section 342.412 (action under subchapter not sale of insurance).
Vote Recommendation Notes
05/26/15 update:
A committee substitute was introduced in Senate Committee. It would require that a lender, before completing the transaction under this section, provide to and review with the borrower a disclosure that would include the total dollar amount of the term life insurance premium, and a comparison between the amount of the payment due on the loan with and without the additional purchase of the term life insurance policy, as well as any disclosure of any shared interest or ownership between the insurance company and the lender.
While we continue to support this bill as modified because it would give an additional option to borrowers, we are afraid the added provision requiring lenders to provide a disclosure with details on the cost of the insurance may constitute an additional administrative burden for lenders that would deter them from offering the insurance option to their clients.
The second chamber sponsor is Senator Kevin Eltife.
First chamber analysis:
A single premium life insurance is a type of life insurance that can be purchased with a single payment in return for a death benefit that is guaranteed to remain paid until the death of the insured person.
House Bill 3938 would allow a lender to offer to a borrower the option of purchasing a single premium life insurance as part of a loan under Chapter 342 of the Finance Code, and to either pay it as a part of the loan, or from the borrower's own fund.
House Bill 3938 would give more freedom to a lender to offer a product that may be of interest to the lender's clients, and it would give an additional option to borrowers to access a certain type of life insurance. In that sense, the scope of government would remain somewhat limited and this bill would favor individual liberty. We support House Bill 3938.
