Credit unions are in a great position to help members prepare for the unexpected and ease financial strain. Talking to members about a consumer loan? Don’t forget the important role your credit protection programs can play in their overall financial well-being.
When offered in connection with a consumer loan, a credit protection program provides vital protection to members when they need it most. The solutions can soften the impact an illness or injury has on their monthly budget – or their life savings or other assets should death occur. It also helps borrowers keep collateral such as a house or vehicle.
Credit protection programs include credit insurance and debt protection. Here is a quick refresher on what makes each program unique:
- Credit Insurance: Credit life insurance can reduce or pay off the insured’s loan balance if they die. Credit disability insurance can pay loan payments, up to the contract limit, if they become ill or disabled and unable to work.
- Debt Protection: Debt protection is a lending program that cancels some or all of the borrower’s loan if they were to die. It also cancels the borrower’s monthly payment up to stated amounts if the borrower becomes disabled or involuntarily unemployed.
The programs are easy to offer at the time of a loan and are an added safety measure for you. They can help ensure that the loans you approve for members are paid back and do not end up in default.
Here are a few tips to keep in mind before offering credit protection to your members:
- Take time to understand their unique financial protection needs
- Determine if they are eligible for coverage
- Be prepared to educate and inform them on:
- What they are buying
- Why they are buying it
- The cost of the program
- How to report or initiate a claim