Credit Life Insurance means “credit life, health, and accident insurance, sometimes also referred to as credit life and disability insurance, and mortgage life and disability insurance.”
A national bank may provide credit life insurance to its customers based on the principles laid down and the limitations incorporated therein.
It is a dangerous and unsafe practice for any director, employee, or principal shareholder of a national bank, who is involved in the sale of credit life insurance to loan customers of the bank, to indulge into that business possibility for personal gain or profit. Principal shareholder is the shareholder who either directly or indirectly controls an interest in excess of 10% of the bank's outstanding voting securities.
If payments to the employee in a year do not exceed the greater of 5% of the recipient's annual salary, or 5% of the average salary of all loan officers involved in the plan, a bank employee or officer may participate in a bonus or incentive plan based on the sale of credit life insurance.
