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Texas Department of Insurance
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Review Requirements Checklist – Collateral Protection Insurance (Physical Damage to Collateral) and Vendors’ Single Interest

Updated 11/16/2021 - Return to Index

Refer to Property & Casualty Filings Made Easy for required documentation.


Filing Standards
Review requirements Reference Comments
Policy Forms and Endorsements §2301.001(2), Insurance Code Policy forms and endorsements may not be unjust, unfair, inequitable, misleading or deceptive.
Prior Approval  Chapter 2301, Insurance Code An insurance policy form or endorsement may not be delivered or issued for delivery in this state unless the form has been filed with and approved by the commissioner. Each filing shall be made not later than the 60th day before the date of any use or delivery for use.
Large Risk Exemption §2301.004, Insurance Code Policy forms for use with large risks are exempt from filing for prior approval if the forms are to be used with a "large risk". "Large Risk" is defined as an insured that has total insured property values of $5 million or more; an insured that has total annual gross revenues of $10 million or more; or an insured that has a total premium of $25,000 or more for property insurance, $25,000 or more for general liability insurance, or $50,000 or more for multiperil insurance.
Disapproval of Forms; Withdrawal of Approval §2301.007, Insurance Code The commissioner may disapprove a form filed under §2301.006 or withdraw approval of a form if the form (1) violates any law, including a rule adopted under the Texas Insurance Code, or (2) contains a provision or has a title or heading that is unjust or deceptive, encourages misrepresentation, or violates public policy.
Applications   Not Required to be Filed For Approval Unless Being Made a Part of the Policy
Review requirements Reference Comments
Arbitration Chapter 2301, Insurance Code Language used in arbitration agreements is to be consistent with that of the policy: to wit, don't use the word "parties" when you actually mean insured(s) and insurer. Binding arbitration is okay. Arbitration agreements may be mandatory. Arbitration must be held in Texas for Texas policyholders unless mutually agree on an alternate. In general, arbitration language cannot be unjust, misleading or deceptive.
Cancellation & Nonrenewal
Review requirements Reference Comments
Cancellation of Collateral Protection Insurance §307.054, Finance Code A debtor may at any time cause the cancellation of collateral protection insurance by providing proper evidence to the creditor that the debtor has obtained insurance as required by the credit agreement. If a debtor provides the creditor with proper evidence that the debtor had insurance on the collateral as required by the credit agreement on or before the date the collateral protection insurance is effective and that the debtor continues to have insurance on the collateral as required by the credit agreement, the creditor shall cancel the insurance that it purchased and may not charge the debtor any costs, interest, or other charges in connection with the insurance.
Elected Officials §§551.151 & 551.152, Insurance Code An insurer may not cancel or refuse to renew an insurance policy based solely on the fact that the policyholder is an elected official.
Insured's Right to Cancel Chapter 2301, Insurance Code Insurance company cannot limit or restrict the insured's right to cancel a policy.
Voiding Coverage Chapter 705, Insurance Code "Void Coverage" language must comply with Chapter 705, Subchapter A, and the misrepresentation must be material.
Choice of Law
Review requirements Reference Comments
Texas Laws Govern Policies Article 21.42, Insurance Code Texas must be choice if filing contains choice of law provision.
Claims Settlement
Review requirements Reference Comments
Prompt Payment of Claims §§542.051 - 542.061, Insurance Code Prompt payment of claims.
Contractual Limitations Period - Suits §16.004, Civil Practice & Remedies Legal action, 4 years.
Contractual Limitations Period - Suits §16.070, Civil Practice & Remedies Except as provided by Subsection (b), a person may not enter a stipulation, contract, or agreement that purports to limit the time in which to bring suit on the stipulation, contract, or agreement to a period shorter than two years. A stipulation, contract, or agreement that establishes a limitations period that is shorter than two years is void in this state. The Texas Third Court of Appeals issued an opinion that acknowledges that the language providing 2 years and 1 day from the date the cause of action first accrues satisfies the statutory requirement of §16.070, Civil Practices and Remedy Code. ( Case #03-08-00408-CV
Notice Requirements §16.071, Civil Practice & Remedies A contract stipulation that requires a claimant to give notice of a claim for damages as a condition precedent to the right to sue on the contract is not valid unless the stipulation is reasonable. A stipulation that requires notification within less than 90 days is void.
Appraisal Chapter 2301, Insurance Code Must specify a number of days, cannot be open-ended and insured must retain their right to bring legal action against insurer, but only if the insurer retains their right to deny the claim (ie., CP 01 42).
Providing Certain Claims Information On Request §§542.101-542.104, Insurance Code; and Commissioner's Bulletin No. B-0043-05 If a policy form or endorsement contains language addressing the request or furnishing of claims information, it would need to comply with the applicable statute(s).
Coverage Issues
Review requirements Reference Comments
Collateral Protection Insurance Chapter 307, Finance Code

Collateral Protection Insurance

(a) Collateral protection insurance is insurance coverage that:
(1) is purchased by a creditor after the date of a credit agreement;
(2) provides monetary protection against loss of or damage to the collateral or against liability arising out of the ownership or use of the collateral; and
(3) is purchased according to the terms of a credit agreement as a result of a debtor's failure to provide evidence of insurance or failure to obtain or maintain insurance covering the collateral, with the costs of the collateral protection insurance, including interest and any other charges incurred by the creditor in connection with the placement of collateral protection insurance, payable by a debtor.
(b) Collateral protection insurance includes insurance coverage that is purchased to protect:
(1) only the interest of the creditor; or
(2) both the interest of the creditor and some or all of the interest of a debtor.
(c) The term of a collateral protection insurance policy may be:
(1) not greater than 12 months; or
(2) the remaining term of the credit transaction if the remaining term is less than or equal to 24 months.
(d) The effective date of coverage for collateral protection insurance may be earlier than the date of issuance of the policy. The effective date may not be earlier than the date the collateral became uninsured.
(e) A premium for collateral protection insurance covering collateral other than real property may not be based on an amount that exceeds the actual amount of unpaid indebtedness of the debtor as of the effective date of the policy. This condition applies without regard to whether the coverage under the policy limits the insurer's liability to:
(1) the amount of unpaid debt;
(2) the cash value of the collateral; or
(3) the cost of repair of the collateral.
(e-1) With respect to collateral protection insurance covering real property, a creditor, at the creditor's option, may obtain insurance that will cover either the replacement cost of improvements or the amount of unpaid indebtedness, subject to policy limits. The debtor shall be obligated to reimburse the creditor for the premium, finance charges, and any other charges incurred by the creditor in connection with the placement of the insurance. The creditor may use the previous evidence of insurance coverage furnished by the debtor to determine the sufficient level of replacement cost coverage to be provided.
(f) Collateral protection insurance does not include insurance coverage that:
(1) is purchased by the creditor for which the debtor is not charged;
(2) is purchased at the inception of a credit transaction in which the debtor is a party or to which the debtor agrees, whether or not costs are included in a payment plan under the credit transaction;
(3) is maintained by the creditor for the protection of collateral that comes into the possession or control of the creditor through foreclosure, repossession, or a similar event;
(4) is credit insurance, mortgage protection insurance, insurance issued to cover the life or health of the debtor, or any other insurance maintained to cover the inability or failure of the debtor to make payment under the credit agreement;

Creditor Duties

(b) Not later than the 31st day after the date the collateral protection insurance is charged to the debtor, the creditor, by prepaid, first class mail, shall mail to each debtor at the last known address on file with the creditor a notice that states:
(1) that the creditor has purchased or will purchase collateral protection insurance on behalf of the debtor and at the debtor's expense as provided by the credit agreement;
(2) the type of insurance that the creditor has obtained or will obtain, the extent of the coverage, and whose interest the policy protects;
(3) the beginning and ending dates of the policy period;
(4) the total cost of the policy to the debtor;
(5) the annual interest rate charged on the cost of insurance if that rate is different from the rate charged in the related credit transaction;
(6) the manner in which the debtor may pay the cost of insurance, interest, or finance charge relating to the purchase of the collateral protection insurance;
(7) at the option of the creditor, other repayment options to which the debtor has agreed in the original credit transaction; and
(8) if collateral protection insurance covering real property is obtained under Section 307.051(e-1):
(A) that coverage may be available to the debtor through the Texas FAIR plan at a lower cost; and
(B)contact information about the Texas FAIR plan.
(c) The creditor shall mail the notice required under Subsection (b) to each person who is a cosigner or guarantor to the debt, if the last known address of that person differs from the last known address of the debtor.
(d) The creditor may delegate the notice requirements under Subsections (b) and (c) to the insurer or the insurer's agent.
(e) The notice required by Subsection (b) must be printed in type that is:
(2)in all capital letters;
(3)in all bold letters; or
(4)otherwise conspicuous.
(f) If the required notice to any debtor, cosigner, or guarantor is returned to the creditor undelivered, the creditor shall:
(1) locate the person by using the procedures the creditor regularly uses for locating debtors; and
(2) mail a second notice at the time the person is located.
(g) The terms for payment of the costs of the collateral protection insurance, including interest and any other charges actually incurred that the creditor may impose in connection with the placement of the collateral protection insurance, must include one or more of the following:
(1) a final balloon payment on or before the 30th day after the date of the last scheduled payment required by the credit agreement;
(2) full amortization over the term of the credit transaction, the term of the collateral protection insurance coverage, or the term for which the amortization is used by the creditor; or
(3) any other repayment terms agreed to by a debtor in the original credit transaction.
Commercial Multi-Peril Chapter 2301, Insurance Code If other coverage is combined with Collateral Protection Insurance, this must be filed as Commercial Multi-Peril.
Examination Under Oath Chapter 2301, Insurance Code
§151.001(a)(7), Family Code
If policy language requires examination under oath, the provision must also state that a parent or guardian may be present during any examination of a minor.
Tie-In Sales Chapter 1806, Insurance Code & 6/1/78 Board Letter Tie-in sales may violate state law.
Disclosure of Guaranty Fund Nonparticipation
Review requirements Reference Comments
Disclosure of Guaranty Fund Nonparticipation 28 TAC §1.1001, Texas Administrative Code, Chapter 461, Insurance Code Disclosure of Guaranty Fund Nonparticipation. NOTE: Texas Property and Casualty Insurance Guaranty Act does not apply to credit insurance, vendors' single-interest insurance, collateral protection insurance, or similar insurance protecting a creditor's interest arising out of a creditor-debtor transaction in accordance with §462.007(b)(4).
Refund of Unearned Premium
Review requirements Reference Comments
Refund of Unearned Premium §307.055, Finance Code (a) On the date the collateral protection insurance is canceled or expires, the amount of unearned premiums, as computed by the Texas Automobile Rules and Rating Manual for collateral to which that manual applies and pro rata for all other types of collateral, shall be refunded to the creditor. Except as otherwise provided in Subsection (b), not later than the 14th day after the date the creditor receives the refund, the creditor shall distribute a refund of unearned premiums by any method selected by the creditor, including:
(1) payment to the debtor by check; or
(2) an adjustment to a credit transaction of the debtor.
(b) If not later than the 28th day after the date the creditor receives the refund the creditor distributes the refund of the unearned premiums by an adjustment to a credit transaction of the debtor that is made effective not later than the 14th day after the date the creditor receives the refund, the creditor shall be in compliance with this section.
General Change Endorsements
Review requirements Reference Comments
May Not Manuscript Coverage Once Approved Chapter 2301, Insurance Code Coverage forms are prior approval. Change endorsements may be used to change insured address, etc. but may not be used to change, alter or "clarify" coverage in any way. Company must provide verification that the endorsement will not be used to change, alter, or clarify coverage. Will be considered violation of prior approval laws.
Rebating or Discrimination
Review requirements Reference Comments
Rebating or Discrimination Chapter 1806, Insurance Code Inducements prohibited.
Indicates new addition since last update.Political Affiliation and Expression Chapter 544, Subchapter M, Insurance Code Except as provided by Section 544.603, a person may not refuse to insure or provide coverage to an individual, refuse to continue to insure or provide coverage to an individual, limit the amount, extent, or kind of coverage available for an individual, or charge an individual a rate that is different from the rate charged to other individuals for the same coverage because of the individual's political affiliation or expression.
Toll Free Information
Review requirements Reference Comments
Notice of Policyholder Complaint Procedures §521.005, Insurance Code A brief written notice of suggested procedure to be followed by the policyholder in the event of a dispute concerning a policyholder's claim or premium.
Toll-Free Information & Complaint Number §§521.051 - 521.056, Insurance Code Toll-Free number for the Texas Department of Insurance.
Insurer's Toll-Free Information & Complaint Number §§521.101 - 521.103,  Insurance Code Insurer's requirement to maintain toll-free number to provide information concerning policies issued by the insurer and to accept complaints from policyholder. Article contains an exception for insurers whose gross initial premium receipts collected in this state are less than $2 million a year or to an insurer with regard to fidelity, surety, or guaranty bonds.
Notice of Toll-Free Telephone Numbers and Information & Complaint Procedures 28 TAC §1.601 & §1.602, Texas Administrative Code and Commissioner's Order 3952 To satisfy requirements for §521.005, §§521.051 - 521.056, and §§521.101 - 521.103 noted above.


Filing Standards
Review requirements Reference Comments
File & Use Chapter 2251, Insurance Code Each insurer shall file with the Commissioner all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state.


Filing Standards
Review requirements Reference Comments
File & Use Chapter 2301 & Chapter 2251, Insurance Code Manual rules should reflect specific requirements for usage of policy forms, endorsements, and disclosures.


Filing Standards
Review requirements Reference Comments
Fees for Paper Checks Prohibited §116.002, Business and Commerce Code Manual rules should reflect specific requirements for usage of policy forms, endorsements, and disclosures.

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Last updated: 11/17/2021