Taking the financial pulse of your members

When a member walks into a branch to discuss lending solutions, do you take their financial pulse? You should. Overall, Americans are faring better financially now than they were five years ago. However, for many U.S. households, there are variations to the story and pockets of economic vulnerability remain.

The Federal Reserve System’s 2018 Economic Well-Being report revealed continued sources of financial strain including fluctuations in in family income and unexpected expenses.

  • If faced with an unexpected expense of $400, four in 10 would not be able to cover it
  • Over one-fifth are not able to pay their current month’s bills in full
  • Three in 10 have family income that varies month to month
  • One in 10 experienced hardship due to monthly changes in income

Financial preparedness may have improved over the past five years, but a sizable share of adults continue to struggle. For young adults, a need for financial support from family and friends is now common. Many households remain financially vulnerable. Credit protection could help. 

As a credit union, you are in a great position to start conversations with members that will improve their financial well-being. Credit protection programs are not new to you, but the need they fill for your members may not always be top of mind. When offered in connection with a consumer loan, a credit protection program provides vital protection to members when they need it. 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 their house or vehicle. 

Credit protection programs include credit insurance and debt protection. There are similarities in the program options, but it’s important to understand the difference. 

  • 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. 

According to a 2017 study, there is evidence to demonstrate why some borrowers do purchase credit insurance. The evidence validates consistently strong satisfaction levels among members purchasing credit-related insurance. 

  • 85% of credit protection purchasers said it was a good idea to do so
  • 70% of purchasers said they would purchase credit protection again
  • 50% of those who did not purchase the protection still thought the protection was a good idea

By taking the step to offer a credit protection program to your members, you can help them prepare for the unexpected and ease financial strain. 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.

Whether you already offer a credit protection program or are now ready to get started, keep the following in mind: 

  • Stay focused on the member:
  • Do they know what they are buying?
  • Are they eligible for coverage?
  • Do they understand what it costs?
  • Is their decision to purchase an informed one?
  • Offer the program consistently to members
  • Establish strong relationships with your vendor to manage the program in a compliant and effective manner

How can Securian Financial help protect your members? Call John Underwood at 763-442-4348.