Debt Protection
More than ever, members worry about what might happen tomorrow. Debt Protection Plans are gaining popularity and providing members with a better sense of security. This voluntary loan-payment protection product helps members get relief from the financial burden of delinquency, default, or foreclosure if a protected life event unexpectedly happens.
Benefit Summary for the Board
Upon the occurrence of a covered event, Debt Protection helps relieve financial stress and worry by cancelling or suspending your loan payment without penalty, added interest or a delinquent report to the credit bureau. Covered events include death, disability, involuntary unemployment, family medical leave and hospitalization.
Management Overview
Debt Protection reduces your credit union’s risk by protecting members’ loans from delinquency, default or foreclosure – and providing you with another source of non-interest income.
Debt Protection for consumer and home equity loans is an agreement between a member and a credit union that if the member dies, becomes disabled, becomes involuntarily unemployed or takes unpaid family leave, the policy may cancel, postpone or suspend the principal and interest (or interest only) portion of the debt up to the benefit maximum.
Due to the extensive coverage this product offers it requires a number of Debt Protection codes. Let CU*Answers create the codes and provide your staff guidance in implementing this coverage.
Checklist
Step 1
A parameter notice is submitted to CU*Answers by either the credit union or by the vendor.
Step 2
If the new rates/parameters conform to existing programming specifications a project will be opened and the number of Debt Protection codes will be determined. If a new calculation is necessary, it may be subject to a custom quote.
Step 3
CUA will configure the codes at Tool #465 based on the Parameter Notice. (up to 24 codes included)
Step 4
The credit union will be provided instructions on how to update their loan products, how to create loan samples and provide reports to their provider.
Step 5
Generally, credit unions with monthly premium calculations, the posting is processed on the first of the month in arrears. A full set of reports is provided. Any other processes needed are based on a custom quote and have potential ongoing processing fees. For more information, please contact a client services representative.
Special Notes:
If the test results do not conform to the vendor’s specifications, many vendors will accept CU*Answers calculations are within their tolerance levels.
