Car Dealer's Loan Insurance "LA&H"
“LA&H” are types of insurance that you can buy on your auto loan. It is an acronym for two types of loan insurance: Credit Life insurance and Accident & Health insurance. The costs of these insurances are charged to the loan and the benefits are paid toward the balance of the loan.
Credit Life insurance will pay off the balance of the borrower’s debt in the event of his death. This would allow the vehicle to be included in the borrower’s estate without being attached by the bank. Obviously, if the customer isn’t worried about what happens to the vehicle when he dies, this is a worthless policy. Sometimes, the “F&I” manager will pitch this coverage as protection for the borrower’s family, as if the debt would be assumed by the family. However, this only applies if there is a co-signer on the loan.
The second type of insurance is “Accident & Health” insurance. Essentially, this will pay the car payment if the borrower becomes sick or injured and is unable to work. Keep in mind that this policy can have many restrictions attached to payment of the benefits and will almost always require a waiting period.
These insurance policies are sold commonly as a package, not individually. In other words, the “F&I” manager will tell the customer that they are “included” to “protect” the customer. Buyers should recognize that these policies may duplicate the insurance policies they already hold.
The costs of these premiums are regulated by the selling dealer’s state laws. In many states, dealers will not even offer these policies to the buyer because of the requirements and the cost of the premiums versus the potential profit. They would rather make $1,000 by selling “Mop and Glow.” As with most insurance policies, the customer can cancel the policy at any time and receive the unearned premium.