Oct. 23--Madison-based credit union insurer CUNA Mutual Group will cancel a life savings insurance product it has offered for 75 years effective Dec. 31, 2014, despite more than 1,000 credit unions nationwide currently providing it as a benefit to their members.
The policies, designed to pay a death benefit based on the balance of a member's credit union savings account, were developed as a Depression-era incentive to encourage thrift and savings at credit unions. As a benefit for members, credit unions pay the monthly premiums on the policies for members who want one.
But the product has fallen out of favor in recent years, CUNA Mutual spokesman Phil Tschudy said, with more credit unions canceling their policies than signing on. Since 2010, about 900 credit unions have dropped out of the program, or about 11 percent per year.
"It was a good product for the time, but times have changed," he said. "We need to help credit unions deliver member protection that is relevant today."
Still, as of this week, about 1,200 credit unions are offering the product to at least some of their members, CUNA Mutual confirmed. Members left in the lurch by the December cancellation can convert the insurance coverage to an individual policy, if they take over the premium payments, which could be adjusted based on a member's age, Tschudy said.
Tschudy noted that the product functions as a group term life insurance program, not a whole life policy that accrues cash value and features guaranteed continued coverage until death. Instead, the expiring life savings product had to be renewed every month and could be canceled with 30 days notice by either side -- the credit union or the insurance carrier, CUNA Mutual.
Over the years, credit unions set the coverage limits and determined the required minimum savings balance that members needed to keep the policy in force.
But generally, Tschudy said, members had to maintain $2,000 in their savings accounts for their estates to receive a maximum $2,000 payout upon their death -- effectively doubling their savings.
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