Reviewed by Aug 27, 2020| Updated on
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?