Debt sucks, no matter how you slice it. What’s worse than debt though is debt that you inherited from someone else. Thankfully, there is a way to prevent that kind of debt known as credit life insurance. What is credit life insurance? We break it down below and why it’s advantageous to get.

What Is Credit Life Insurance?

Simply put, credit life insurance is an insurance policy designed to pay off a loan in the event of an unexpected passing.

However, although it’s in the name, credit life insurance is not life insurance. They may share similarities, but credit life insurance and life insurance are actually 2 different products.

Therefore, depending on your needs, you may want to get one or the other, or both. We recommend getting both if you rely on credit to pay for the majority of your expenses.

Unlike life insurance, getting credit life insurance doesn’t require a medical exam having to disclose health details since the balance of the loan is what’s being insured, not the life of the policyholder.

What Coverage Does Credit Life Insurance Provide?

In most policies, credit life insurance covers any remaining debt that a borrower has. Additionally – usually in the form of a premium on the borrower’s monthly loan payment – the lender is set up to be paid even if the borrower passes on before the loan is paid in full. For example, if you and your spouse are joint owners of a home and both are on the mortgage, in the event one of you passes away the rest of the mortgage will be paid off in full. Upon the borrower’s untimely passing, title to the underlying asset is then transferred free and clear to the borrower’s estate and, ultimately, to the beneficiaries of that estate.

This kind of insurance is most often tied with car loans or mortgages since the cost of them is rarely paid off in full either at purchase or within a short period of time.

How Much Can You Expect to Pay for Credit Life Insurance?

The cost of credit life insurance primarily depends on the amount of the loan itself it’s being insured against. Other factors also include the type of credit and the type of policy.

Due to the higher risk of paying debt, credit life insurance premiums are typically less affordable compared to life insurance policies.

Who Credit Life Insurance Is Best For

Naturally, credit life insurance benefits people who are in debt, but the coverage credit life insurance can also benefit people in other situations as well.

• For instance, you may want to sign up for a policy if your coverage will be getting more and more affordable as you near paying off your debt.
• Another situation when credit life insurance would be helpful would be for people who want coverage similar to that of life insurance but want to avoid getting a medical exam.
• Finally, if you aren’t eligible for life insurance (or premiums for life insurance would be outside of your means) credit life insurance can give you some peace of mind knowing your loved ones still have some financial protection.

Although credit life insurance will work well for some people, there are still other similar alternatives that may be even more beneficial. Life insurance can provide more comprehensive coverage and provides financial support that’s free to use on any kind of debt. Upgrading an existing life insurance policy may also be more affordable and advantageous as well depending on your circumstances.

Need assistance finding the best life insurance policy for you? Contact us today for help!