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For Co-Borrowers, Joint Disability Payment Protection Can Be Critical
Wednesday, February 4, 2015 6:30 AM

By Suzy Pursell

Nearly half of all U.S. families had two working spouses in 2013, and almost six in 10 of these households included children, according to the U.S. Bureau of Labor Statistics.1 Most of these households probably count on both incomes to make ends meet, which credit unions should take into account when lending to co-borrowers.

If your credit union offers co-borrowers joint disability payment protection, such as with credit disability insurance or debt protection, be sure co-borrowers know about its advantages. For example, joint protection:

  • Generally costs members less than the combined cost of separate single protection for two people.
  • Kicks in even if only one of the borrowers becomes disabled.
  • Can cover up to two borrowers.
  • Can augment existing disability benefits such as employer-provided benefits that often pay 60 percent or less of an employee’s regular income.
  • Products generally don’t require medical exams, so members aren’t automatically disqualified for poor health.

Gain Non-Interest Income While Helping Members Reduce Risk

By promoting joint protection for co-borrowers, credit unions can increase non-interest income while extending more protection to member households.

Non-interest income gained through payment protection products is non-punitive: Members receive a benefit rather than pay a fine as they do with overdraft fees. Protecting loan payments through a joint disability protection product can not only generate goodwill toward your credit union, it can reduce delinquencies, charge-offs, and defaults.

Most states now allow joint disability protection. Work with your lending staff so they’re up to date on how to explain joint protection to members who would benefit from it, especially if you’ve recently added this option.

Because many consumers are confused by the various coverages related to disability through work or government programs, your staff may need to practice basic follow-ups to some common reactions:

“I think we already have disability insurance through work.”

  • If you’re counting on both of your incomes to meet your loan obligation, do you both have disability coverage? Do you know whether you and your co-borrower have coverage for short-term disability, long-term disability, or both?
  • Do you know what percentage of your regular paycheck these coverages replace? Is the monthly benefit capped?

 “We’d get workers’ compensation benefits if one of us couldn’t work.”

  • Do you know the difference between workers’ compensation benefits and disability insurance?
  • Workers’ compensation only applies to work-related illness or injury, and that’s rare. Fewer than 5 percent of disability claimants in companies surveyed by the Council for Disability Awareness were also receiving workers’ compensation payments in each of the years from 2009 through 20132.

“Social Security has benefits for disabled workers.”

  • The Social Security Administration reported in 2014 that it denies 66 percent of Social Security disability claims.3 For example, claims are generally denied if the disability isn’t projected to prevent the person from working for at least one year.
  • After submitting a Social Security disability claim, you’ll typically wait at least three to five months just to get a decision, and you won’t begin to receive benefits for five months from the onset of your disability.

Asking an extra question or two could help members avoid financial hardship. Even if they don’t know the answers, it’s worthwhile because it may prompt them to check their actual benefits so they can make an informed choice.

Suzy Pursell is a credit insurance senior product manager for CUNA Mutual Group. Reach her at Suzy.Pursell@cunamutual.com.

1 U.S. Bureau of Labor Statistics, Employment Characteristics of Families Survey (2014)
2 Council for Disability Awareness, 2014 CDA Long Term Disability Claims Review (2014)
3 Social Security Administration, Disabled Worker Beneficiary Data (2014)

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health, and annuity insurance products are issued by CMFG Life Insurance Company. Property and casualty insurance products are issued by CUMIS Insurance Society, Inc. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. Corporate headquarters are located in Madison, Wisconsin.