FAQs | cafii

Faqs

What is Creditor's Group Insurance?

Creditor's Group Insurance, also called (credit insurance or creditors insurance), pays off a customer's outstanding debt or makes/postpones monthly payments on the customer's behalf if an adverse event such as death, disability, job loss or critical illness should occur. Banks offer this insurance in conjunction with a loan or credit card as an added customer benefit.

About two-thirds of Canadian households do not have an insurance agent or broker, so creditor insurance is a convenient way to help offer financial protection.

Creditor's Group Insurance on a mortgage will pay off the debt in full if the income earner dies, thus ensuring that the surviving family members do not lose their home.

Credit Card Creditor's Group Insurance is a product offered to credit card holders providing a bundle of protection products that vary by insurer and card provider but can include the following:

Coverage to preserve customers' credit ratings by paying their minimum monthly payments after 30 days of involuntary unemployment (with some plans paying retroactively to the first day)
- Job Loss Insurance
- Disability Insurance
Coverage to pay customers' balances to a specified limit (coverage limits range from $10,000 to $25,000)
- Life Insurance
- Accidental Death and Dismemberment
- Critical Illness (for specified critical illnesses such as Cancer, Heart Attack or stroke)
Coverage to offer cash if hospitalized
- Some products feature a lump sum payment if hospitalized for specified number of consecutive days

What are the benefits of the product?

There are many benefits to creditor insurance, for example:

It is a valuable product that offers simple, affordable and convenient access to insurance protection.
It provides benefits that are not readily available elsewhere (Job Loss Insurance)
It provides broad access to insurance protection to families in the underserved lower and middle income market who may not otherwise have insurance.
It is delivered nationally, in a uniform manner, at a similar price, even in remote locations.

Creditor's Group Insurance on a mortgage will pay off the debt in full if the income earner dies, thus ensuring that the surviving family members do not lose their home.

Job Loss Insurance, a major part of the insurance bundle, provides peace of mind in today's economy and is broadly available to credit card customers but very hard to acquire individually.

Why does an Insurance Company deny claims? Are there exclusions in the policy?

A very high percentage of claims are paid, however, all insurance policies have exclusions. A claim will not be paid if any of the standard insurance industry exclusions exist such as:

Suicide within the first 2 years of coverage
Self inflicted injuries
Self employed & voluntary job loss for Job Loss insurance
Death while committing a criminal act such as drunk driving
Customers weren't eligible for insurance when they applied

The Insurance Companies perform a thorough and fair review of all claims to ensure that they comply with the terms and conditions stated in the certificate of insurance.

How does the consumer learn about the insurance and the various exclusions?

We support clear communication so our customers know exactly what they are getting. Our objective is to give customers the information they need to make informed decisions. Our members provide marketing materials and certificates, detailing coverage and exclusions that are easy to understand. We are always working to improve clarity. Sales staff are trained to point out features and limitations of the insurance and answer customer questions. In addition, information is available on our members' websites and consumers are given a toll-free phone number to call with any questions. Customers can take their time to do a full review of all materials - they have a generous "free look" period, typically 30 days, during which time they have insurance coverage and can cancel with premium refund.

Why buy Creditor's Group Insurance rather than traditional life insurance?

Our research shows Creditor's Group Insurance is very price competitive. Most insurance applicants are insured immediately without the need for medical tests and everyone of the same age pays the same rate, regardless of health. Individual Term Life Insurance pricing varies based on a number of factors such as occupation, gender and smoking habits. Creditor's Group Insurance accepts more customers at basic rates. Creditor's Group Insurance matches exactly the amount of debt and is competitively priced. Creditor's Group Insurance typically includes Job Loss insurance which is hard to find in any other coverage. Creditor's Group Insurance may be the customer's only opportunity to buy coverage, as most people don't have an established relationship with an agent or broker.

Is Creditor's Group Insurance sold by licensed insurance agents, and if not, why?

Government regulation generally does not require individual licensing to enroll a customer in a group insurance plan. We offer a simple product design and straightforward enrolment process. Creditor's Group Insurance applications (usually 1 page), certificates of insurance and underwriting are much simpler than standard industry life insurance. CAFII members' staff who offer creditor products are trained on the products they sell and are highly supervised both in branch and in client contact centres. Furthermore, our members comply with industry guidelines and codes of conduct for the offering of creditor insurance products.

Are Negative Option Marketing, Coercion and other misleading selling practices used?

Negative option marketing, coercive tied selling practices are illegal and are not utilized by our members.

Might a Customer feel pressured to buy the "add-on" Creditor's Group Insurance product?

Creditor's Group Insurance products are optional and are part of the larger financial relationship with customers. CAFII members would not jeopardize the overall customer relationship for the sake of an additional product. Consumers can rightfully trust their financial institutions to offer them products which they need to enhance their financial security. Creditor's Group Insurance products are affordable, readily accessible and simple to purchase for consumers who are considering taking on new debt.

Can the customer change his or her mind and discontinue insurance coverage?

Customers have a "free look" period which is typically 30 days during which time they have insurance coverage and can read over their material and assess any other options. If they decide they do not want coverage, they can discontinue and receive a full premium refund. Alternatively, after the free look period, they can discontinue at anytime and pay no further premiums.

Is the selling practice of the banks tracked and monitored by a government agency such as the FCAC?

Yes. The Financial Consumer Agency of Canada (FCAC) monitors and tracks the enquiries and complaints of the public pertaining to the Financial Marketplace. This includes monitoring of compliance with industry guidelines and codes of conduct and complaints on Creditor's Group Insurance. The number of complaints received on Creditor's Group Insurance is negligible.