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Credit
Credit History
Credit Insurance
Credit Insurance -
What is it?
Many types of credit that people apply for will include the option to
purchase credit insurance. Examples include credit cards, mortgages,
personal loans, and lines of credit.
Credit insurance is exactly what it sounds like - it is insurance on the
money borrowed. Sometimes, credit insurance is already included in a loan
or mortgage agreement; however, if this is the case, by law you must be
informed of it's inclusion. Often, credit insurance is optional.
There is no one kind of credit insurance. The protection is designed to
protect the money borrowed in the event that you are unable to repay it.
The insurance may cover or not cover many things, including loss of
employment, illness, disability, death, and so on. Having said that, there
are 4 primary types of credit insurance. They include:
1) Credit Life Insurance
This type of insurance means that in the event of your death, some or all
of the loan will be forgiven.
2) Involuntary loss of income/Involuntary unemployment insurance
This insurance covers the loan in the event that the individual looses
their employment through no fault of their own, such as getting laid off
from a job.
3) Credit Disability Insurance/Accident and Health Insurance
This type of insurance covers the loan in the event that you experience an
injury or illness that renders you unable to work.
4) Credit Property Insurance
This type of insurance protects personal property that was initially used
to secure the loan. The protection covers personal property if it is
destroyed due to natural disasters, theft, or accident.
There are important considerations when deciding whether or not to
purchase credit insurance. Most important are your needs, and the cost of
the credit insurance. For example, are you better off to purchase separate
life insurance at a lower rate than credit life insurance? These are
important questions. Others include:
- Will the insurance cover the full loan or only a portion of it?
- How much is the premium?
- Is the premium being financed as part of the loan? In effect, are you
paying interest on the insurance?
- Are different payment options available, such as monthly or quarterly?
- Does the insurance cover you throughout the entire duration of the loan?
- Can you cancel the credit insurance?
- Is there a waiting period prior to which the insurance goes into effect?
If you decide you don't want credit insurance, tell the lender
immediately. Always read the fine print before signing any loan papers,
and ask any questions about any detail you don't understand, regardless of
how small the detail is. Most importantly, if a lender informs you that
you cannot get the loan or credit unless you purchase credit insurance,
report the person and the institution to your local
State Attorney General's office
or contact the
FTC, as this practice is against
the law.
If you don't feel that you have the tools to make an informed decision
about whether credit insurance is right for you, talk to a family member,
banker, credit advisor or accountant and get the answers you need before
making this important decision.
Contact us today!
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Free online
credit evaluation - No Cost, No Obligation!!
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