Is Credit Life Insurance Worth It?
If you have ever applied for a loan or have signed up for a credit card then you may have been offered credit insurance. This concept may have been confusing, however it is worth your time to get to know exactly what credit insurance can do for you, and whether or not it is a financially savvy move to invest in this type of insurance.
What is Credit Insurance?
Credit insurance is a category of life insurance that is purchased by a borrower in order to pay off existing debts that they have in the case that they pass away prematurely, become disabled or in some cases when they become unemployed. In most cases credit insurance is offered to people as part of signing up for a new line of credit. This means that the monthly cost of this type of insurance is a percentage of the credit card’s outstanding balance.
The Downside of Credit Insurance
For many people credit insurance can help them out financially in the case that an unexpected catastrophe occurs. However, there are a few downsides of credit insurance that can cause people to think twice before purchasing one of these policies. A majority of credit insurance policies are overpriced in relation to the benefits that customers receive from them. On top of this, most credit insurance policies come with an overwhelming amount of fine print that makes it difficult to collect on unless regulations are meticulously followed. Despite this, if you feel that credit insurance can help give you peace of mind in case something unexpected were to occur then it may be worth your time to compare credit insurance quotes to a term life insurance policy.
The Benefits of Credit Insurance
Not only does credit insurance protect you and your family in the case of an unexpected catastrophe, but there are also a number of other benefits that come with this type of insurance. For example, credit insurance can allow you to increase the amount that you borrow, as a credit insurance policy will aid you in gaining the maximum amount of working capital possible. Additionally, with credit insurance you do not have to worry about an annual or monthly payment schedule, as the premium will be included in the loan that you take out. This also means that your credit insurance’s premium will never go up and your insurance policy will never lapse during the length of your loan term.
Alternative Options to Credit Insurance
At the end of the day there are several alternatives to credit insurance that are substantially more cost effective. If you are seeking an insurance policy that protects a loan that you took out against job loss, death or disability then you may want to consider other options. The most common alternative is term life insurance, which will provide money to your family in order to pay off any outstanding debt after your death. This type of policy also allows your family to have more flexibility, as it can be used for any sort of need. On the other hand, credit insurance can only be used for a specific loan and is included in the terms of your policy. Overall, buying a smaller credit life insurance policy is more expensive then using a regular life insurance policy in order to protect your family. You may also want to consider a disability life insurance policy, which will give you much more flexibility than a credit insurance policy. Some places of employment offer these types of policies at a much more affordable price then that of credit insurance.
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