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    Surviving Uncertainty: Customized Credit Insurance Programs

    Each year, Dictionary.com chooses a single word to define the previous 12 months. The People’s Choice 2020 Word of the Year was "Unprecedented."

    Senior Research Editor for Dictionary.com, John Kelly, said, “The pandemic, the protests, the extreme climate episodes—2020 sent us searching for a word that could do justice to the scale and pace of all this upheaval. We landed on unprecedented, and this was borne out both in lookups as well as in all the emails, ads, and headlines reminding us we are living in unprecedented times.”

    With 2022 peeking over the horizon, many of us have grown used to the constant disruptions that come with living through a global pandemic. For financial institutions and their borrowers, however, being unprepared for dealing with uncertainty can lead to loss.

    Luckily, there are a variety of customized credit insurance programs available to help lenders and their borrowers mitigate the risks of living through unprecedented times. These programs include credit life, credit disability, and, for lenders in Texas, credit involuntary unemployment insurance (IUI). When unexpected circumstances like job loss, disability, or even death occur to one of your borrowers, their loan premiums will be covered for a specified amount of time and/or be paid off in full depending on their coverage.

    In this blog post, we’ll discuss how offering credit life, disability, and IUI can help your institution support and build better relationships with borrowers, mitigate risk, and generate non-interest income.

    Credit Life Insurance

    Credit life insurance is designed to pay the remaining loan balance in the event of the borrower’s death. Your borrower’s family will not have the financial burden and additional stress during these times of difficulty.

    Disability Insurance

    Disability insurance is designed to pay all or a portion of the loan payment, if program maximums are met, for each day the borrower is injured or ill and unable to work while under a doctor’s care. This is important, given the following statistics from the National Safety Council and the Bureau of Labor Statistics:

    • One person suffers a disabling injury every two seconds
    • Social Security approves on average 37% of disability claims filed
    • 69% of disabling injuries occur off the job
    • 50% of foreclosures are a direct result of a disabling injury or illness

    Involuntary Unemployment Insurance (IUI)

    Lenders in the state of Texas are able to offer credit IUI through SWBC Life Insurance Company to their borrowers. This type of insurance is meant to reduce the stress and financial burden of an untimely job loss. The COVID-19 pandemic highlighted the need for this type of protection, as many companies were forced to scale back their operations or close their doors altogether. Prior to 2020, no one could have foreseen the impact of a global pandemic on employment. Consider the following statistics:

    • In June 2021, the current national unemployment rate was 5.9%
    • four million people have been unemployed for 27 weeks or more
    • Long-term unemployment accounts for 42.1% of those unemployed

    Offering your borrowers protection from the unexpected with credit life, disability, and IUI can help your financial institution add value and build better borrower relationships. It can also help your institution increase revenue from non-interest income and mitigate risk for you and your borrowers during this era of uncertainty. 

    Shifting Focus to Your Underinsured Borrowers

    Joan Cleveland, CLU, ChFC, REBC

    Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the Consumer Credit Insurance Association, the Texas Association of Life and Health Insurers, as well as the Life Insurers Council. In addition, she is chair of LIMRA’s Strategic Marketing Issues Committee.

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