Back in the good ol’ days of F&I (we’re talking 70’s and 80’s specifically here), one of the more profitable and popular products a dealer could sell ‘in the box’ was credit life insurance and accident/health insurance (A&H). You could hold a high margin and when coupled with an extended warranty, an F&I manager could make serious PRU depending on the loan amount.
Times have changed, though and it’s worth asking…is credit life and A&H even worth offering anymore? What are some tips to sell it in today’s consumer environment?
Let’s take a closer look at how this nearly forgotten product can still have a place on the F&I menu…
What is it and how it helps – Assuming your dealership is in a state that allows the sale of credit life and A&H (many do not and there are some states that cap margins), you already know what it is designed to do. Insurers will offer credit life plans that pay off the loan if the borrower dies either with a decreasing benefit (pays the loan amount at the time of death) or level benefit (set amount paid).
A&H picks up the payments that are in danger of being missed due to accident or other health issues. For borrowers with challenged credit or lower income, this really can be a valuable product that can offer peace of mind when life unexpectedly throws them a curveball.
Understand all the ways this product serves to protect the buyer. It’s not enough to try to scare the buyer into thinking they must have this coverage…focus on the many benefits of having it. It’s all about the WHY, not the HOW. Paint the picture, share a story of another buyer who was glad they had the coverage, and walk them through what it will look like on a personal level if they don’t have it. You can deliver this message with professionalism and empathy.
Ask the right questions – It should go without saying that if you are not asking a TON of questions throughout the process, you are leaving money on the table. But for credit life and A&H, the questions are a bit unique and requires a little bit of courage to ask them.
Here’s a common scenario…
After looking at the credit app you notice that the buyer is a full-time roofer and his wife works at a nearby factory on the line. Both should be immediate triggers to ask, “With a loan balance of $35,000 for this truck, I assume you have cash reserves to make the payment if something were to happen to either of you on the job?”
Intrusive question? Perhaps, but necessary to help paint the picture and get the buyer thinking about what would happen if either of them was actually hurt on the job. How would that payment get made with all the other monthly expenses they have? Remember, you don’t need a number, you simply need them to imagine NOT having the money in the bank for two- or three-months’ worth of payments.
Another question that should be standard for every buyer? “Do you have any insurance policies in place that will pay off your debts in case something was to happen to you? Would you have enough to pay the balance of this truck loan if either of you were to pass?”
Yes, that may be a little morbid to ask but it helps get the information you need to properly offer a product that could mean the difference between keeping their truck or losing it to the repo man.
If you ask with sincerity and are transparent about why you are asking, there is a decent chance they will take the coverage if it is a nominal amount to add in. After all, an extra $15-25 per month to know the balance won’t come out of an existing insurance payout may be money well spent.
Don’t assume anything – I knew F&I managers back in the day that would automatically assume a buyer wouldn’t take the coverage because the buyer had a crazy-high FICO, or they made 6 figures, or they had some other weird disqualifying bit of information on their credit application.
Assume nothing. If your dealership is able to offer it, offer it to everyone. The buyer making $100k a year may have a huge family, tuition bills, and more than a few credit cards. He may need that payment protection more than the lady making half that with no debt.
Make it a standard part of every payment you quote. It’s easy enough to take out if they don’t want it. Let them know your office always makes this offer due to so many past customers sharing how the coverage help in hard times.
Life and A&H is not a dead product though some may think it is. It is worth offering if your state allows it. Ok, so maybe the margins are not what they once were, and regulatory requirements make it a bit more challenging to offer it but if you can, why not? It’s profit that can add up even if it only comes in on 5-15% of your deals.
Make sure it’s on the menu and let the buyer decide if this is peace of mind they could use. You may be surprised who says ‘Yes’.