ST. PAUL, Minn. – Debt protection insurance makes perfect sense for Honeywell FCU. The credit union primarily serves employees and family members of Honeywell, a well-known producer of thermostats and other control equipment. At its height the company employed over 18,000 employees, but the number dwindled to about 5,300 after rounds and rounds of layoffs. Honeywell, headquartered in St. Paul, merged with Allied Signal a few years ago and relocated its headquarters to New Jersey. Honeywell FCU, also based in St. Paul, started offering a debt protection program from Securian, a Minnesota Life affiliate, this March. The key component of the debt protection is involuntary unemployment insurance coverage that covers members' loan payments in the event they are laid off. "When we process consumer loans, we always ask if they're interested in credit insurance. Some who declined the coverage would say they're covered through work, but occasionally they'd ask about unemployment insurance. It seemed to be a more pressing issue for them," said Bob Steensma, Honeywell FCU's VP of Lending and Sales. Steensma said the interest from members makes sense given the layoffs the company has endured. The debt protection product covers employees for up to six months. The product is completely customizable in terms of loan duration. A member could choose to just have the first two years of the loan covered for example, or go longer and shorter depending on their needs. Steensma classifies it as an affordable insurance product. To add debt insurance to a $15,000 car loan would add about $25 on to the monthly payment. Steensma said it's no secret that credit unions are craving non-interest income that this kind of product brings to help their shrinking margins. "All credit unions are or should be taking action to increase their non-interest income. Statistically we are far behind our bank counterparts," said Steensma. He said that credit unions who have the competency to do mortgage lending have done well, but those that don't or which are just getting into it are looking to other means for fee income. For Honeywell, it's been add-on insurance products. Debt protection is just one product Honeywell is trying. It's also seen a non-interest income boost from Mechanical Breakdown Coverage and GAP Insurance, in addition to the more traditional credit life and disability. Steensma said the key has been training employees to become more sales-oriented and to give them the expertise to sell these add-on loan products. When the CU launched the product in March only about 20% of its consumer loans were risk-protected with credit insurance. Now some 34% carry either credit insurance or debt protection. The credit union's leaders were concerned that debt protection would hurt the sales of credit life and disability, but it's apples and oranges, said Steensma. "We didn't want to cannibalize credit life and disability. We didn't want people to take this as opposed to that so to speak. But some people who just aren't interested in credit life and disability are interested in debt protection, so it works well," he said. Securian currently has 13 credit unions using its debt cancellation product. "Our thought all along has been that debt protection products should not replace credit insurance products, but complement them," said Tom Goodwin, regional VP for Securian. The company helps the CU increase penetration of the product through marketing, training and service support. [email protected]