What exactly is a credit union protection plan like GAP, mechanical breakdown, credit life, and disability insurance? Purchasing a credit union protection plan can be a great way to ensure your loans and income are covered in any eventuality, but navigating the choices can be confusing.
Here’s what you need to know about the protection plans available at Oregonians Credit Union.
You can visit our Insurance & Loan Protections page to see our full list of products.
What is GAP insurance?
GAP (guaranteed asset protection) insurance is an auto insurance add-on that pays the difference between the depreciated value of your car and what you still owe on the car in the event that your car is stolen or totaled. GAP insurance is only available for the current borrower on an auto loan, or current leaseholder, on the new vehicle. Coverage can also be available for eligible motorcycles, boats, RVs and campers.
GAP insurance is often recommended for drivers purchasing an expensive, new vehicle, considering that most new vehicles depreciate by 19% in their first year of ownership. This causes many drivers to be under water on their auto loans toward the beginning of the loan’s term.
If your vehicle is stolen or totaled in an accident, it will cancel $1,000 of your next loan with Oregonians, when you purchase a replacement vehicle within 60 days of your primary insurance settlement.
How much does GAP insurance cost?
While prices will vary among providers, GAP insurance generally costs between $400 and $700 when purchased from a dealership, and between $20-$40 a year when added to an existing auto insurance policy.
Is GAP insurance for everyone?
GAP insurance is a great idea for all borrowers, but especially recommended for drivers who are, or may be, upside down on their auto loans. Drivers who have made a down payment of less than 20% on the auto loan, and/or who have a loan term that is 60 months or longer, will usually fall into this category.
GAP insurance is also a good idea for drivers leasing a new vehicle. Some leases will automatically include GAP coverage in their contracts.
Learn more about the GAP insurance that Oregonians Credit Union offers, on our insurance information page.
What is mechanical breakdown insurance?
Collision insurance covers damage to your vehicle caused by accidents. Comprehensive coverage will pay for damage caused through other means, such as a windshield shattered by a rock. But who pays for damage caused by the natural wear and tear of a vehicle?
This is where mechanical breakdown insurance (MBI) comes in. MBI will cover almost any kind of breakdown in your vehicle due to wear and tear so you don’t have to pay for these repairs on your own. Similar to purchasing an extended warranty on a vehicle, coverage can include a faulty transmission, a broken carburetor or a brake repair. MBI will not cover regular maintenance and upkeep of the car, such as replacing spark plugs, refiling fluids and changing the tires.
How much does mechanical breakdown insurance cost?
Mechanical breakdown insurance costs, on average, $100 a year; however, there is usually a deductible that needs to be paid as well, averaging $250-$500 a year.
Is mechanical breakdown insurance for everyone?
Mechanical Breakdown Insurance (MBI) is especially recommended for drivers financing a new vehicle, as the repairs on these vehicles can be quite costly. An extended warranty may offer the same coverage, but is usually more expensive than an MBI plan.
In addition, it can be a good idea to purchase MBI for a vehicle the driver intends to keep for more than five years. MBI will also help ensure that the car remains fully functioning for years to come.
Learn more about the MBI insurance that Oregonians Credit Union offers, on our insurance information page.
What is a credit life insurance?
Credit life insurance is a life insurance policy that pays off a borrower’s outstanding debts if the borrower dies. The face value of the policy decreases along with the outstanding loan amount as the loan is paid off over time, until both reach zero value. If the borrower dies before the loan is completely paid, the insurance will pay off the remaining amount.
Credit life insurance is often sold by financial institutions and private lenders along with home and auto loans. It may also be offered by creditors to consumers opening a new line of credit.
One major advantage of credit life insurance is the fixed premiums throughout the term of the policy. In contrast, premiums for traditional life insurance can increase by 8-10% a year.
How much does credit life insurance cost?
Premiums for credit life insurance policies are often rolled into the payments of the connected loan. Policies usually cost $0.50 for every $100 borrowed.
Is credit life insurance for everyone?
Credit life insurance is most suitable for borrowers whose loans have been cosigned by a relative. If the borrower dies before the loan is paid, the cosigners will be responsible for the outstanding amount; however, if the borrower has purchased a credit life insurance plan, the remaining loan amount will be paid off by the insurance provider.
Credit life insurance can also be advantageous for individuals who do not have a life insurance policy and are not in the best of health. Credit life insurance policies generally have looser eligibility criteria than traditional life insurance and often do not require a medical exam at all.
Oregonians Credit Union offers life insurance through TruStage Life Insurance. Learn more on our insurance information page.
What is disability insurance?
Disability insurance provides income in the event that a policyholder is unable to earn an income due to a disability. In the United States, disability insurance can be purchased from the government through the Social Security system or from a private insurance provider. Both long-term and short-term disability insurance will replace a part of the policyholder’s salary up to a predetermined cap.
According to the Social Security Administration, more than one in four 20-year-olds will experience a 90-day disability before they turn 67.
How much does disability insurance cost?
Rates for disability insurance are based on your salary and generally run from a yearly rate of 1-3% of your annual income.
Is disability insurance for everyone?
Purchasing disability insurance can be a financially responsible move for any employee. Having a plan in place in case of disability is especially important for individuals who work in an accident-prone field, or those who are the primary breadwinners in their home.
Protecting your loans, debts and earning potential can seem like a daunting task, but with the right plans in place, you can maintain your financial wellness for years to come.
Have you purchased a protection plan through your credit union? Tell us about it in the comments.
