Debt Protection Coverage: Overview

Debt Protection (sometimes called Debt Cancellation) is a credit union loan product, not an insurance product. Debt Protection, while providing many of the benefits offered by loan insurance such as life and disability, has greater flexibility in coverage, including unemployment, divorce, diagnosis of a terminal illness, continuance of coverage until the primary borrower as well as the first co-borrower (if one exists) reach the age maximum after the loan maker is over age (via “blended” coverage), etc.

Regulation of the product is done by the NCUA for federally-chartered credit unions and by the equivalent state agency for state-chartered credit unions. Unlike credit insurance, minimal regulations exist currently for product pricing, fee calculation method, and product configuration.

CU*BASE Debt Protection has been configured to work with CUNA's product (called CU CHOICE Lending Protection “CUCLP”) and mimics level rate calculation methods. Although a “table” method is available in the configuration, it has not yet been tested or certified for any credit union or vendor.

Because this is not insurance, the terms “insurance” and “premiums” do not apply. Throughout CU*BASE you will see references to “debt protection coverage” and “fees” instead.

Four different types of Debt Protection coverage are available:

Single	Coverage applies just to the primary borrower, and ends when that borrower passes the age limit.
Joint	Coverage applies to both the primary borrower and the co-borrower. When either of the borrowers passes the age limit, coverage switches to the single rate and covers only the other borrower from that point on. Coverage ends completely when that remaining borrower passes the age limit.
Co-borrower	Coverage applies just to just the co-borrower, and ends when that borrower passes the age limit.
Blended	Coverage applies to the primary borrower as well as the first co-borrower (if one exists). Coverage does not end for either borrower until both of the borrowers have passed the age limit.