Credit life insurance – How does it work?
What is Credit Life Insurance?
When you hear about credit life insurance, it is easy to confuse it with a standard life insurance policy. But as a consumer, you need to understand the credit life insurance, is designed to pay off the balance of a loan in the event of death.
Credit life insurance is a life insurance policy designed to pay a policyholder’s debt when the policyholder dies. Credit life insurance can also protect a person’s dependent. In other words, in the event of your death, the outstanding capital on a short or long term debt will be paid out to the provider of the loan.
How does credit life insurance work?
Credit life insurance is simply insurance put in place by creditors on the lives of those people loaning money from them. Finance companies put insurance policies like this in place so that they don’t have the hassle of trying to recover their money if you die or become disabled.
So they insure your life and get you to pay the premiums along the way.
The most important thing to note about credit life insurance is that it is not the same as normal life insurance. Most people think that their dependents could get money from this insurance should anything happen to them. This will come in handy with whatever debt you have – so home, car, and any other debts you still need to pay off.
It is best to consider all financial decisions with caution! Do not be rushed into signing any policy and only do so after you have completed a financial needs analysis and it is found that you do need additional life cover. When you do decide to purchase credit life insurance, do so through a registered and reputable insurer, having carefully studied the terms and conditions and keep all the policy documentation in a safe place!
Have a look at the different insurance products that we offer at National Debt Advisors