Interest; prepayment.
1. A company shall not charge or collect a charge for interest which is not permitted by this section.
2. Interest must be computed on the balance due, after subtracting the down payment, from the effective date of the insurance contract or agreement, whichever is earlier, through the date on which the final installment is payable.
3. The rate of interest must be specified in the agreement. The agreement may provide for a service charge of not more than $25, and that the charge is not refundable.
4. An insured may prepay in full at any time the unpaid balance of the principal. The insured is entitled to a refund of the unearned portion of the prepaid interest. The refund must be at least as great a proportion of the prepaid interest as the sum of the periodic balances for each period beginning one period after the prepayment is made bears to the sum of all the periodic balances under the schedule of payments in the agreement. If the amount of the refund is less than $1, no refund need be made.
5. Any provision which purports to limit the insured’s right of prepayment pursuant to this section is void.
Last modified: February 27, 2006