Credit life insurance and the underinsured/uninsured American

According to the 2016 LIMRA Ownership Study, almost half of all U.S. households have an average life insurance coverage gap of $200,000 per household. This same research also showed that 37.5 million households do not have any life insurance at all which means that 30% of U.S. households are completely uninsured. There is a silver lining in this research though, particularly for financial institutions, as the LIMRA findings identified that trust is the number one factor that comes into play when an individual does indeed purchase life insurance coverage. And guess who they trust first and foremost? Their financial institution. The main driver for purchasing life insurance is to replace lost income so that debts can be paid.This sounds like the perfect rationale for providing credit insurance to your borrowers!

The beauty of credit insurance is that it is obtainable in small amounts.With most insurance carriers, $100,000 is the minimum face amount for a fully underwritten (best pricing if insurable) term policy. Conversely, $25,000 is often the maximum amount for a guaranteed issue (no medical evidence), individual life insurance policy. Credit life insurance can be purchased in exactly the specific amount to cover the outstanding loan balance and tracks the decreasing balance of the loan until it is paid off. Pretty slick—just the right amount of coverage at all times.

Individuals can also purchase credit disability and credit involuntary unemployment coverage (the latter just with SWBC Life in the state of Texas only) which ensures that the borrowers’ monthly payments are made for a set number of months if they experience either of these two events. But you know what? Many individuals that can qualify for credit disability cannot buy an individual disability policy on their own as they may not be able to financially justify the purchase.

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