Leveraging credit life or credit disability insurance to protect your assets
If you're like many Americans, when you set out to buy a new car, recreational vehicle, boat, etc., you find it's often easier to finance your purchase. This way you can make payments in manageable monthly installments and begin enjoying your purchase right away. But what happens if you pass away, become disabled, or lose your job before paying off the balance of your loan? That's where credit life and credit disability insurance can help.
What is credit insurance?
Credit insurance is an insurance policy that you as a borrower can take out to pay your lender at a time when you can't pay. So if you were to pass away, get laid off, or become unable to work due to a disability that prevents you from making your scheduled loan payments, credit insurance will repay the loan by making payments to your lender on your behalf. Many banks, credit unions, and finance companies make it easy for you to pay credit insurance premiums by simply including them in your loan payment calculation at the time of purchase.
Why should you consider credit insurance?
Life is unpredictable. And if you are suddenly unable to work, having your credit insurance policy pick up your loan payments can be a big help at a very stressful time. Also consider what could happen if you were to pass away. Having credit insurance will ensure that your beneficiaries are not held responsible for covering the debt.
What types are there?
There are many different variations of credit insurance, and not every insurance or finance company offers the same type of coverage. However, there are typically four main types of credit insurance:
- Credit life insurance - Credit life insurance is a type of insurance policy that can be taken out when you get a mortgage, car loan, a loan from the bank, or a home equity loan. It is designed to pay off your loan if you die.
- Credit disability - Credit disability insurance pays a limited number of monthly payments on your loan in case you are unable to make payments due to disability.
- Credit involuntary unemployment insurance - This type of coverage pays a specified number of monthly loan payments if you're laid off.
- Credit property insurance - Credit property insurance protects personal property used to secure a loan if it's destroyed during the term of the coverage.
How much does credit insurance cost?
There are three factors that typically determine the cost of a credit insurance policy: the loan amount, the type of credit, and the type of policy.
What should I consider before buying a policy?
Always think about your needs when deciding on credit insurance, and consider asking the following questions before you buy a policy:
- How much is the annual premium?
- Will the premium be financed as part of the loan?
- Can I pay the premium monthly instead of financing the entire premium as part of my loan?
- Will the insurance cover the full length of my loan and the full loan amount?
- What are the limits? What are the exclusions? (What's covered and what's not.)
- Is there a waiting period before my coverage becomes effective?
To protect your assets, you might consider looking at credit insurance for your next loan. It can be one way to supplement your existing life and disability policies, and give you that extra layer of protection.
Current credit life and credit disability policy holders please call 1-800-323-5771 or visit Protective Asset Protection. Existing agents or dealers as well as those interested in offering Protective Asset Protection products please visit the Protective Asset Protection website.