When you apply for a personal loan, or a mortgage, you may be asked if you would like to purchase credit insurance to. It may even already be included in your loan proposal.
So what is credit insurance?
Credit Insurance protects a loan in the event that you are not able to make payment on the loan. There are four main types of credit insurance: Credit life insurance pays off a loan in the event of your passing. Credit disability insurance pays for a loan in the event that you are injured, ill, or disabled, and cannot work to make payment on the loan. Credit property insurance protects personal property used to secure the loan, in the event the property is destroyed by accident, theft, or natural disaster. Involuntary unemployment insurance makes your loan payments if you loss your job thru no fault of your own.
Credit insurance is optional, which means that you are not required to purchase it from the lender. The Federal Trade Commission says it is against the law for a lender to deceptively include credit insurance in your loan, without your consent.
Before you decide to purchase credit insurance you want to think about a few things.
1. How much is your premium, do you really need this insurance to cover the cost of the loan payment in the event you can't make it?
2. Would it be more beneficial for you to purchase credit life insurance, or just Life insurance? May be you already have a good life insurance plan.
3. If you do decide to purchase credit insurance, does it cover the entire length of your loan, and the full loan amount?
4. How much more are your monthly loan payments going to be if you purchase credit insurance?
5. If you have a co-signer, or co-borrower, what coverage does the credit insurance give them?
If you're out loan shopping, before you sign the contract, ask the lender if the loan includes any charges for credit insurance. A lender can't deny you credit because you opted not to get credit insurance. If they do pressure you, find another lender. If you feel that you have been wronged or denied credit solely on the basis of not obtaining credit insurance, make a report to your local sate attorney general, your state insurance commissioner, or the FTC.
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