Ala. Code
Code of Alabama

Ala. Code § 5-19-20 (2026)

Insurance.

✓ official Alabama Legislature (ALISON) text, current July 2026
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(a) With respect to any consumer credit transaction, the creditor shall not require any insurance other than insurance against loss of or damage to any property in which the creditor is given a security interest and insurance insuring the lien of the creditor on the property which is collateral for the transaction.

(b) (1) Credit life and disability and involuntary unemployment insurance may be offered and, if accepted, may be provided by the creditor. The charge to the debtor for the insurance shall not exceed the premium permitted for the coverages. Insurance with respect to any credit transaction shall not exceed the approximate amount and term of the credit.

(2) This subdivision (2) applies to all consumer credit transactions entered into on or after June 19, 1996. If the consumer credit transaction is scheduled to be repaid in substantially equal installments which include a portion of the amount financed, the amount of credit life insurance at any time shall not exceed the greater of the approximate unpaid balance of the debt, excluding unearned finance charges, if any, or the approximate unpaid scheduled balance of the debt, excluding unearned finance charges, if any, plus the amount of one scheduled payment. The amount of credit life insurance on single payment consumer credit transactions and the amount of accident and health insurance and involuntary unemployment insurance shall not exceed the approximate amount of the total of payments. The amount of credit life insurance under an open-end credit plan shall not exceed the approximate unpaid balance of the debt from time to time. The debtor’s estate or a named beneficiary shall be entitled to any excess credit life insurance benefit.

(c) If the debtor fails to provide any required property insurance, the creditor may, but is not required to, purchase insurance insuring its interest only, or with the debtor’s written consent, insuring both the creditor’s interest and the debtor’s interest, and the premium for the property insurance together with interest on the premium at the contract rate or other rate agreed to in writing may be charged by the creditor to the debtor. The premium charged to the debtor for any insurance shall not exceed the premium approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance for the insurance, as applicable. If the insurance insures only the creditor’s interest in the property, the term of the insurance provided pursuant to this subsection shall not exceed the approximate remaining term of the credit, and the amount of insurance shall not exceed the approximate amount of the unpaid balance of the debt excluding unearned finance charges, if any. The administrator may promulgate regulations pursuant to Section 5-19-21 to provide further for the term and maximum permissible amount of insurance which covers the creditor’s interest in the property.

(d) The premium for nonfiling insurance, insuring the lien of the creditor on any property which is collateral for the consumer credit transaction, may not exceed the cost of filing of a lien on the property and any document necessary to continue the lien and is nonrefundable. The insurance may be required in both purchase money and nonpurchase money secured transactions. A creditor may not charge a debtor the cost of filing the lien and a premium for nonfiling insurance in a consumer credit transaction.

(e) If a creditor requires any insurance against loss of or damage to any property in which the creditor is given a security interest, the debtor shall have and be given written notice of the option of obtaining the insurance through a person of the debtor’s choice. If the debtor does not exercise the option of providing the insurance through an existing policy or a policy independently obtained and paid for by the debtor, the creditor may purchase the insurance on the property and charge the premium for the insurance to the debtor. The premium or premiums charged for such required insurance shall not exceed the premium approved by the administrator or the rates filed by the insurer with the Alabama Department of Insurance, as applicable. The creditor may, for reasonable cause, decline the insurance provided by the debtor.

(f) When property insurance, as permitted herein, is required by the creditor, is not furnished by the debtor, and is purchased by the creditor, then upon renewal, refinancing, or payment of the debt before the final maturity date, the creditor shall refund or credit the debtor with that portion of the premium refunded by the insurance carrier upon the termination of the insurance.

(g) A creditor may not contract for or receive a separate charge for insurance against loss of or damage to property or against liability for property damage or personal injuries unless the original amount financed exclusive of the charges for insurance is three hundred dollars ($300) or more and the value of the property is three hundred dollars ($300) or more.

(h) In no event shall the creditor have any responsibility or liability for the failure to purchase any insurance permitted by this section unless the creditor has affirmatively undertaken in writing to purchase the insurance.

(i) A creditor may offer and finance any other insurance in connection with any consumer credit transaction upon such terms as are authorized by regulation of the administrator.

(Acts 1971, No. 2052, p. 3290, §16; Acts 1986, No. 86-304, p. 451, §3; Acts 1987, No. 87-766, p. 1494; Acts 1996, No. 96-576, p. 887, §2.)

Notes of Decisions
Cited in 12 cases, 1987–2004 · leading case: Mccullar v. Univ. Underwriters Life Ins., 687 So. 2d 156 (Ala. 1996).
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Mccullar v. Univ. Underwriters Life Ins., 687 So. 2d 156 (Ala. 1996). · cites it 34× “" Ala.Code 1975, § 5-19-20. What is the plain meaning of this sentence of the statute? Neither "credit" nor "credit transaction" nor "approximate amount .”
Voyager Ins. Companies v. Whitson, 867 So. 2d 1065 (Ala. 2003). · cites it 5× “The selling of credit life insurance and the premium charged for credit life insurance are regulated by the Alabama Mini-Code (Ala.Code § 5-19-20(a)) and the Department of Insurance for the State of Alabama (Regulation 28).”
Spears v. Colonial Bank of Alabama, 514 So. 2d 814 (Ala. 1987). · cites it 9× “The plaintiffs allege that Jim Burke required them to purchase credit life and diability insurance in order to purchase the automobiles, and that the price of this insurance exceeded the premium charged by the insurance company, all in violation of § 5-19-20. In essence, they…”
Mayflower Nat. Life Ins. Co. v. Thomas, 894 So. 2d 637 (Ala. 2004). · cites it 5× “" "The Court therefore finds that Defendant [Heard] has thereby violated Ala. Code § 5-19-20 (b)(1)." "The Court finds that Defendants overcharged on the premium by applying an excessive rate.”
Watkins v. Birmingham Ret. Sys., 802 So. 2d 190 (Ala. 2001). · cites it 3× “[3] Watkins alleged in his complaint that the System had required him to obtain the credit-life-insurance policy in violation of Ala.Code 1975, § 5-19-20(a) ("With respect to any consumer credit transaction, the creditor shall not require any insurance other than insurance…”
Knepp v. Credit Acceptance Corp. (In Re Roy A.), 229 B.R. 821 (Bankr. N.D. Ala. 1999). · cites it 2× “See Alabama Code § 5-19-20 (1975). *846 IX. WHETHER THIS ARBITRATION CLAUSE LIMITS ARBITRATION TO DISPUTES BETWEEN THE DEALER AND PURCHASER.”
Surrett v. TIG Premier Ins. Co., 869 F. Supp. 919 (M.D. Ala. 1994). · cites it 3× “She also contends that these optional charges, which were cited in the master policy, were excessive and violated § 5-19-20 of the Alabama Code. Section (a) states in part that “[w]ith respect to any credit transaction, the creditor shall not require any insurance other than…”
Mitchell v. Indus. Credit Corp., 898 F. Supp. 1518 (N.D. Ala. 1995). · cites it 3× “Code § 5-19-20 states the type of insurance that a creditor may offer under the Mini-Code.”
Gen. Motors Acceptance Corp. v. Massey, 893 So. 2d 314 (Ala. 2004). · cites it 2× “" They sought damages under various theories, including (1) breach of contract, (2) wrongful repossession, (3) breach of fiduciary duty, and (4) violation of Ala.Code 1975, § 5-19-20 and certain "State Banking Regulations.”
Royal v. Daihatsu (In Re Royal), 197 B.R. 341 (Bankr. N.D. Ala. 1996). “Code § 5-19-20 (the “Complaint”). The case was assigned Civil Action Number CV-96-035.”
Gall v. Am. Heritage Life Ins. Co., Inc., 3 F. Supp. 2d 1344 (S.D. Ala. 1998). · cites it 8× “CODE] § 5-19-20 must comply with the Department’s rules and regulations.”
Mills v. Green Tree Acceptance, Inc., 767 So. 2d 1097 (Ala. 2000). “Count I of their complaint alleges that the contract required them to purchase insurance coverage that had no value and which could not have been required, given the terms of § 5-19-20(a), Ala. Code 1975, part of the “Mini-Code.”
Ala. Code § 5-19-20(a): 7 cases
Mccullar v. Univ. Underwriters Life Ins., 687 So. 2d 156 (Ala. 1996). “" Ala.Code 1975, § 5-19-20. What is the plain meaning of this sentence of the statute? Neither "credit" nor "credit transaction" nor "approximate amount .”
Voyager Ins. Companies v. Whitson, 867 So. 2d 1065 (Ala. 2003). “The selling of credit life insurance and the premium charged for credit life insurance are regulated by the Alabama Mini-Code (Ala.Code § 5-19-20(a)) and the Department of Insurance for the State of Alabama (Regulation 28).”
Watkins v. Birmingham Ret. Sys., 802 So. 2d 190 (Ala. 2001). “[3] Watkins alleged in his complaint that the System had required him to obtain the credit-life-insurance policy in violation of Ala.Code 1975, § 5-19-20(a) ("With respect to any consumer credit transaction, the creditor shall not require any insurance other than insurance…”
Spears v. Colonial Bank of Alabama, 514 So. 2d 814 (Ala. 1987). “The plaintiffs allege that Jim Burke required them to purchase credit life and diability insurance in order to purchase the automobiles, and that the price of this insurance exceeded the premium charged by the insurance company, all in violation of § 5-19-20. In essence, they…”
Surrett v. TIG Premier Ins. Co., 869 F. Supp. 919 (M.D. Ala. 1994). “She also contends that these optional charges, which were cited in the master policy, were excessive and violated § 5-19-20 of the Alabama Code. Section (a) states in part that “[w]ith respect to any credit transaction, the creditor shall not require any insurance other than…”
Ala. Code § 5-19-20(b)(1): 1 case
Mayflower Nat. Life Ins. Co. v. Thomas, 894 So. 2d 637 (Ala. 2004). “" "The Court therefore finds that Defendant [Heard] has thereby violated Ala. Code § 5-19-20 (b)(1)." "The Court finds that Defendants overcharged on the premium by applying an excessive rate.”
Ala. Code § 5-19-20(d): 1 case
Mccullar v. Univ. Underwriters Life Ins., 687 So. 2d 156 (Ala. 1996). “" Ala.Code 1975, § 5-19-20. What is the plain meaning of this sentence of the statute? Neither "credit" nor "credit transaction" nor "approximate amount .”
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