Credit Insurance Coverage

Credit insurance coverage is designed to provide cover for both individuals and businesses if they are unable to pay a debt in certain circumstances that are outlined in the policy. For individuals, circumstances that may be covered include losing one’s job, disability from an accident, death etc. Taking out credit insurance coverage benefits, not only the person with the debt but also the lender. The debtor has the peace of mind of knowing that, should unforeseen, and unavoidable, circumstances arise that prevent him paying back the debt it will be paid by his insurance company. The lender is guaranteed that the debt will be paid in many different situations including the death of the debtor.

Credit insurance coverage is sometimes included in proposals for mortgages and loans or may be offered as an addition. It is generally optional and you also have the option of purchasing it from another provider instead of the lender. If it is included in the loan proposal it should be clearly stated as it is illegal for it to be included deceptively.

Money Four types of credit insurance coverage are available:

Credit life insurance – pays of the loan in the event of death of the insured
Credit disability insurance – pays of the loan in the event of permanent disability of the insured
Involuntary unemployment insurance – pays of the loan in the event of unemployment of the insured
Credit property insurance – protects personal property that has been used as security for the loan

All of these insurance policies pay off debt that is current at the time of the event detailed above. This is an important point to note as any arrears present at the time of the event are not covered nor any debts that may be incurred afterwards.

Considerations on Taking out Credit Insurance Coverage

There are a number of things to take into account and questions to ask before you purchase this type of insurance coverage.

the cost of the premiums
is the payment monthly or will the premiums be included in the loan?
is the full loan amount covered?
is the loan covered for the full length of time of the loan?
what limitations are there on the policy?
are there any exclusions on the policy?
are you covered immediately or is there a waiting period?
are there refunds if you cancel?

An important consideration is to decide if you will be paying monthly or including the credit insurance coverage in the loan. Although this might seem like a good idea it will increase the loan amount and you will be paying interest on, not only the loan, but the insurance coverage as well. Paying monthly, if you can afford it, is cheaper in the long run.

Please also note that a company offering a loan cannot insist that you take out their credit insurance coverage, or indeed any credit insurance coverage at all! You are free, legally, too reject this type of insurance cover or to purchase it from a different company. If a loan company insists on you purchasing thsi type of insurance as a conditin of the loan they are acting illegaly and you should report them to the FTC or your state insurance commision.

Best Insurance Coverage Information