Navigation:  Loans > Loan Screens > Insurance Screen Group > Policy Detail Screen > Policy Information tab > Insurance Information field group > Refund Rules

Use the Refund Rule field to indicate how refunds are calculated on the selected insurance policy.

 

State laws and regulations determine how a refund is calculated, whether it is calculated on a daily or a monthly basis, and whether a 1-day, 14/15-day, 15/16-day, or 16/17-day rule is used. Each insurance company must file their refund formulas with the state commissioners indicating the basis they use for calculating refunds.

 

Be sure that the refund rule entered in this field is in compliance with the state law that was in effect when the policy was issued.

 

Possible selections in this field are:

 

 

The refund rule is used to determine how many months are remaining in the policy term. The remaining months are used in all refund calculations.

 

•In the 14/15-day rule, your institution cannot charge the borrower for that month’s insurance premium during the first 14 days of each policy month. You can charge the borrower for a full month’s insurance premium 15 days or more into the policy month.

 

•In the 15/16-day rule, your institution cannot charge the borrower for that month’s insurance premium during the first 15 days of each policy month. You can charge the borrower for a full month’s insurance premium 16 days or more into the policy month. The 15/16 day (factor) rule (code 10) calculates the number of months earned as follows:

 

Earned Days = number of days between the policy effective date (INOPND) and the payoff date.

 

Earned Days / 30.4375 = Elapsed months (truncated)

 

Earned Days - (Earned Days (truncated) * 30.4375) = elapsed odd days

 

If Elapsed Odd Days > 15 then add 1 to Elapsed months

 

•In the 16/17-day rule, your institution cannot charge the borrower for that month’s insurance premium during the first 16 days of each policy month. You can charge the borrower for a full month’s insurance premium 17 days or more into the policy month.

 

•In the 1-day rule, your institution cannot charge the borrower for that month’s insurance premium until 1 day after the effective day of the policy month.

 

A policy month is not the actual days of the month; it begins with the day of the Policy Effective Date. The day of the effective date is not used when counting days elapsed. For example, if the Policy Effective Date is 03/02/15, the policy month begins on the 2nd of the month. Using the 1-day rule, your institution would not be able to charge a premium for that month until the day after the effective date. Using the 15/16-day rule, your institution would not be able to charge a premium for that month until 15 days after the effective date.

 

Example:

 

Policy term is 60 months, with an effective date of 03-02-14

 

 

See the Min Refund Amount, Do Not Refund, Return All, and Return All/Within Days fields to learn about options that may affect whether or not a customer is eligible for insurance premium refunds.