Credit Life Insurance
Credit life insurance is often offered through credit card companies, mortgage companies and other lenders. Credit life insurance covers the amount of the outstanding balance on a loan if the debtor dies. As the amount of the debt shrinks, the rates on credit life insurance are automatically lowered making it an ideal way to manage financial obligations at a minimal cost.
Who Can Collect The Death Benefit?
The death benefit on credit life insurance is paid directly to the lender. This benefits the family of the insured by paying financial obligations that they would otherwise have to pay from other life insurance proceeds or from their own finances. Credit life insurance can be important for couples who own a home together since a surviving spouse might not have enough individual income to cover the cost of monthly mortgage payments and might face foreclosure.
Who Should Purchase Credit Life Insurance?
Couples who are married or in a legal, civil union may be held legally responsible for debts incurred by their partners. Those with large credit card balances, mortgages, business, personal or car loans should purchase credit life insurance to protect their surviving partner from repossessions and garnishments which may be instituted by lenders seeking repayment of debts. Failure to cover mortgage debt with credit life insurance could mean that surviving family members would lose their home and have to relocate. Other options include mortgage life insurance and survivorship life insurance.
How To Buy Credit Life Insurance
If a lender does not automatically offer credit life insurance, the borrower should ask if it is available on a particular loan. If the loan has a strict repayment schedule like a car or home loan, the insurance may be paid for in a lump sum when the policy is purchased.
For revolving debt like credit cards or credit lines extended to small businesses, a monthly charge for credit life insurance may be included with the credit card statement. Due to the amount and length of mortgage loans, credit insurance premiums are included in monthly payments.
Other Options
Credit life insurance policies are available through life insurance companies, agents or brokers and consumers may wish to compare quotes and rates between the lender’s insurance and a privately purchased credit life insurance policy. It may be necessary to provide the lender with proof of coverage to finalize a loan.
Lenders will sometimes include the premiums for the life insurance in the loan payments without the knowledge of the loan applicant, so it is smart to ask lenders if payments include life insurance to avoid paying unnecessary premiums.
Considerations For Other Life Insurance Types
If an individual has credit life insurance on major debts, the amount of the debts should not be considered when selecting the limits for a separate term life or whole life insurance policy. Although the loss of a wage earner can impact the income of the surviving family, spouse, or children, credit life insurance will eliminate mortgage payments which constitute a major living expense. Life insurance only needs to cover the actual expenses surviving family members will have in the event of the insured person’s death.
Life Insurance Quotes
For couples, parents, or children who are responsible for one another’s debts, credit life insurance may be an important part of financial planning. Those who have obtained loans with co-signers should also have credit life insurance to protect the co-signer. Buying life insurance is a responsible choice for anyone with major debt which would become someone else’s problem should they die.
To buy affordable credit life insurance, enter your zip code to compare life insurance quotes online. With an instant, free life insurance quote, consumers can compare types of policies, coverage, rates, and companies to find the best life insurance.
