Credit Life Insurance

Credit life insurance explained

Credit life insurance is a convenient life insurance product which covers an outstanding debt and relieves much of the strain of managing one’s finances.

A credit life insurance policy adapts perfectly to your specific debt.  The size of the death benefit is always equal to the cost to be covered,* and the premium you pay is derived from the current amount owed.  Therefore, as you amortize the debt, your credit life insurance policy automatically shrinks and becomes cheaper.

A credit life insurance policy’s beneficiary is the creditor—not the insured’s family.

*State laws and company policies often limit the maximum death benefit allowed for a given life insurance policy.  In the event that your debt exceeds this limit, your coverage may not amount to the entirety of the debt in question.

Who should buy credit life insurance?

Credit life insurance can be of value for anyone who carries a debt that might affect his or her survivors.

When a debtor dies, his debt does not fall upon his heirs, but debt can indirectly wreak havoc on survivors’ lifestyle nonetheless because any property purchased on credit can be repossessed.  Dwellings and cars, for instance, are often purchased on a payment plan or by means of a loan.  If a wage-earner in such a circumstance should die prematurely, his or her survivors should likely find themselves out of a home or deprived of transport.

Credit life insurance pays off debts immediately and secures survivors’ ownership of their possessions.

Paying for credit life insurance

Some debts entail required payment plans, which ensure that all the money will be repaid by a certain time and that interest will not exceed a certain amount.  Credit life insurance policies for these debts can be completely paid for with a single, grand premium at the inception of the policy.

The alternative method of payment is a series of periodic premiums, after the usual manner of life insurance purchase.

A bad rap for credit life insurance

Because Wholesale Insurance is a life insurance brokerage agency, our primary concern is to bring you the protection you want at the best price on the market.  However, some organizations that sell credit life insurance are not actually life insurance producers, and when their goal is anything other than getting you the best life insurance at the best price, you may end up with a financial burden which does not actually serve you in the least.

When taking a debt upon yourself, you may find that your creditor (it might be the bank that issues your loan or the dealership that sells you your car) requires a credit life insurance policy from you.  If your debt is not something that could adversely affect your survivors—for instance, if you’re buying an extra vehicle which they will not use—a credit life insurance policy provides no protection for them at all; it only creates a drain on your finances.

Overeager buyers have sometimes actually failed to notice that they are paying for a credit life insurance policy.  Credit life insurance policies can be concealed within a loan agreement or within a purchase agreement.  Life insurance premiums may be coupled with debt charges into a single payment price, which obfuscates the purpose of the expense.

If you have encountered negative reports about credit life insurance, just remember that they may be entirely justified by the speakers’ experiences.  But with Wholesale Insurance, your own experience will be totally different.