Debt Cancellation Policy Replacing Credit Life

A “debt cancellation” contract that replaces the traditional credit life or health insurance policy has been introduced to the F&I market by Central States of Omaha.

Advantages of the “Secure Pay Plus” contract, says the provider's spokesman, Greg DuPlessis, include no-commission caps applicable as required by several states, and no state license is needed since debt cancellation is not considered an insurance product.

To simplify the coverage and facilitate its marketing by business managers, Central States has bundled together in a single policy accidental death and “critical period” disability and involuntary unemployment as causes for payment of existing car debt.

“That gives us a lower pricing point than credit life and disability policies, and requires no application health questions,” says DuPlessis. “Debt cancellation literally becomes a ‘sign here/$20 payment-a-month’ immediate coverage seller.”

Central States says its consumer focus groups indicate that vehicle buyers worry more about fatalities or disabling injuries resulting from accidents than they worry about facing illnesses during the periods of extended loans.

“The involuntary unemployment coverage speaks to the borrowers' economic concerns — ‘How do I keep this loan current if I should suddenly lose my job or get laid off?’” DuPlessis says.

To broaden availability of involuntary job loss coverage, Central States is selling the policy as a stand-alone package for vehicle buyers who prefer traditional credit insurance. The Central States product is sold wholesale to dealers and marked up like GAP (guaranteed auto protection) coverage.

Calling its product more profitable than credit insurance, Central States offers it on a refundable or non-refundable basis. The insurer recommends the non-refundable option as being administratively easier to process.