E-file your Income Tax Returns for FREE

E-file your Income Tax Returns for FREE

Credit Insurance

Reviewed by Bhavana | Updated on Sep 30, 2020

Catalogue

What is Credit Insurance?

Credit insurance is a form of insurance policy a borrower purchases in the event of death, injury, or unemployment, in rare cases, paying off one or more existing debts. Credit insurance is most often sold as a credit card option, with a low percentage of the unpaid balance of the account being compensated for the monthly costs.

In the case of certain catastrophes, credit insurance may be a financial lifesaver. Nevertheless, several credit insurance policies are overpriced in relation to their benefits, as well as filled with fine print that can make a recovery difficult. If you believe credit insurance gives you peace of mind, be sure to read the fine print and match the quote against a regular life insurance policy.

Types of Credit Insurance

*- Credit life insurance: *This is a type of life insurance policy that pays off loans in the event of your death.

*- Credit disability insurance: *This type of credit insurance, also known as accident and health insurance, will pay a monthly benefit to a lender directly. This benefit will be equal to the minimum monthly payment of the loan if you become disabled.

- Credit unemployment insurance:With this type of insurance, a monthly benefit will be directly paid to the lender that is equal to the minimum monthly cost of a loan if you become accidentally unemployed.

Things to Consider Before Buying Credit Insurance

  • Do you have any other insurance or assets which would cover debt obligations in the case of death, disability, or unemployment?

  • Would it be easier to buy a life insurance policy or an insurance policy for the disability? Credit insurance will cost more than other traditional insurance policies.

  • When you buy a single premium policy, will the cost be paid as part of the loan? If yes, how much will the loan payment increase because of the credit insurance costs?

  • Will the credit insurance cover the entire length of the loan and the balance?

  • What will not be covered under the policy?

  • Can the insurance company/lender terminate the insurance?

  • Can policy premiums or terms be modified without consent?

Related Terms

Recent Terms