The next time you apply for a personal loan, you may be offered credit life and/or credit disability insurance. Credit life insurance pays off all or some of your loan if you die and credit disability insurance makes payment on the loan if you can't work due to a covered illness or injury.
If you've been wondering if credit life or credit disability insurance is worth the extra cost, consider your finances. If you were to become seriously ill or disabled, would you be able to keep up with the loan payments? And if you died, would your spouse or family have enough money to pay off the loan or lose your property to debt collectors? Credit life and credit disability insurance can provide protection for both your property and good credit.
When you enter into a finance agreement with a lender, you do so in good faith. In exchange for regular payments, you and your family can enjoy your new home, car, boat, motorcycle, etc. But life is unpredictable and you can't foresee a serious illness, disability, or death that could prevent you or your family from being able to make your payments.
Most auto loans, whether obtained through the dealer, a bank, a credit union or any other lender, give the creditor the right to repossess a vehicle if you default on your loan - without having to give prior notice. Having the protection of credit life insurance could pay off the balance on your loan if you die, and credit disability could make your payments so that your personal property will remain with your family. It's important to note that payments from these policies are payable to the lender and not a chosen beneficiary.
Creditors consider payment history when evaluating you as a credit risk and deciding whether or not to approve you for credit. Having a history of on-time payments suggests that you are a responsible borrower; a poor history of payments suggests that you are a credit risk.
If you were to become disabled and be unable to make your loan payments, your credit rating may be negatively affected, causing a long-term effect on your future buying power. By obtaining credit insurance, you not only protect your property, but you might also protect your credit score from being adversely affected if you are unable to work.
To protect your assets, consider looking at credit insurance for your next loan. It can be an affordable way to supplement your existing life and disability policies, and give you that extra layer of protection — and peace of mind.