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What Is Credit Life Insurance

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Is Credit Life Insurance Worth It

How to Claim Credit Life Insurance : Insurance Questions Answered

General wisdom states that credit life insurance isnt an ideal form of life insurance. It isnt really all that necessary since most debts cant be inherited anyway. And if you do have debts you share with other people, you could always use a term or universal life insurance policy to provide your beneficiaries with enough funds to pay off shared debt. Youll get more coverage for less money with term life insurance than you would with credit life insurance.

One big downside to credit life insurance as opposed to regular life insurance is that the value of a credit life insurance policy decreases over time. Say you owe $200,000 on a mortgage you co-signed with your spouse. You decide to buy a $200,000 life insurance policy. If you buy a credit life insurance policy, the value of your policy will decrease from $200,000 as you pay down the mortgage. However, you keep paying the same premiums. Thats because youre only insured for the amount you owe. But with term life insurance, you keep paying premiums and your policy value stays at $200,000, even if you completely pay off the mortgage. Thats better for your spouse and more value for your money.

Eligibility For Credit Or Loan Insurance

To find out if youre eligible for credit or loan insurance, you usually need to:

  • be above the minimum age to qualify, usually 18 years old
  • be under the maximum age to qualify, often between 65 and 70 years old
  • respond to a short health questionnaire of yes or no questions.

Based on your answers to the health questionnaire, you may be approved right away or you might need to take a medical exam before you can be approved.

Your insurance wont be valid if you do not provide accurate answers on this questionnaire. This means a claim wont be paid, even if youve paid premiums. Take your time in answering the questionnaire carefully and truthfully. Understand if youre eligible for coverage and ask questions if you have any. Take the documents home with you or consult with a medical professional if needed.

You may lose your coverage if:

  • youre over your credit limit
  • you owe any payments that are past the due date
  • you have recent dishonoured payments on your account

Dishonoured payment happens if an automatic payment does not go through because you’ve reached your credit limit.

Things To Consider Before Buying Credit Life Insurance

Since credit life insurance may cost more than regular life insurance and is intended to benefit the lender, there are a few things to take into consideration before buying it.

You may want to consider buying credit life insurance if:

  • You want to pay for coverage that is declining as you pay down debt. This is a good choice as you will be paying less and less protection each month.
  • You cannot buy life insurance through regular channels because of the medical exam. Credit life insurance will not require a medical exam.
  • If you cannot qualify for enough life insurance to cover debts that you may leave behind. Credit life insurance will help you cover the debts so that your loved ones will not be responsible for them.

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Examples Of Credit Life Insurance In A Sentence

is required as part of a mortgage loan agreement.

, if required as part of a mortgage loan agreement.

SELECTED FINANCIAL DATAFIVE-YEAR SUMMARYTHE SCOTTS COMPANY AND SUBSIDIARIESFor the fiscal year ended September 30 1991 1992 1993 1994 1995==== ==== ====== ====== ======Consolidated Statement of Income DataNet sales ……………………………

INSURANCE: , credit disability insurance and debt cancellation coverage, which is also known as GAP coverage, are not required to obtain credit, and will not be provided unless you sign and agree to pay the additional cost.

and, in some situations, damage waivers are a bad deal for slightly different reasons: The stakes can sometimes be high, and thus might be worth insuring just not when the cost is so high relative to the expected value.

How To Make A Claim

Credit Life Insurance

Check your certificate of insurance for the steps to make a claim.

Usually, you start your claim either online or over the phone through the insurance company listed in your certificate of insurance. You will likely be asked to complete claims forms and you may be required to provide more information and take a medical exam.

Most certificates of insurance require that claims be made within a certain timeframe, usually ranging from 90 days to a year from the date of your injury, critical illness, disability or death, depending on the type of claim youre making. Youll find information about the timeframe to make your claim in your certificate of insurance. Its important that you begin your claim during this timeframe or your claim might be declined.

Keep in mind that the benefit is paid to your creditor to reduce or pay off your debt. Your creditor is the company that you owe money to. For example, if you have mortgage life insurance, the benefit is paid to the financial institution that provided the mortgage to pay off your mortgage in the event of your death.

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What Is Credit Life Insurance And Do You Need It

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.

Theres a certain degree of risk when you take out a loan, especially if youre borrowing a lot of money. Protecting others from shouldering your debts if you die can be a natural concern. However, debts are rarely inherited, which means your loved ones probably wont be responsible for your loan.

In some situations, though, your debt can have a negative impact on the ones you leave behind. Credit life insurance helps lessen these risks by repaying the lender if you die before paying off the loan. But this type of insurance isn’t always necessary and can be very expensive. Before you buy a policy, consider the costs and explore alternatives like term life insurance, which typically offers the same type of protection for less.

Re: Cancellation Of Credit Life Or Credit Disability Policy Andcalculation Of Unearned Premiums

Question Presented:

What New York Insurance Law or Regulation outlines the method to beused in calculating the amount of unearned premiums that should be returned to an insuredafter cancellation of a credit life or credit disability policy obtained as part of aretail instalment agreement?

With regard to credit life or credit disability policies obtained undersuch circumstances, N.Y. Comp. Codes R. & Regs. tit. 11, § 185.8, outlines the method insurers may use when calculating unearned premium refunds.

Facts:

The inquirers company is licensed by the Banking Departmentpursuant to the retail instalment sales act and the question here does not involve apremium finance agreement. The inquirer asks what New York Insurance Law or Regulationspecifies the formula to be used for calculating unearned premiums when an insured cancelsa credit life or credit disability policy.

Analysis:

N.Y. Comp. Codes R. & Regs. tit. 11, Part 185, , deals with Credit Life and Credit Accident and Health Insurance.1 Theinquirer asks what method is used in New York for calculating unearned premium refundswhen a credit life/disability insurance policy is cancelled. N.Y. Comp. Codes R. & Regs. tit. 11, § 185.8, provides, in pertinent part, as follows:

* * *

the date on which termination of insurance becomes effective

in the case of monthly installment, the installment due date nearest the date of termination

the date based on any other procedure filed by the insurer and approved by the superintendent.

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What Is Credit Insurance

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.

Though it sounds like life insurance or disability insurance, there is a key difference: Credit insurance does not pay you anything instead, it only ensures that the lender continues to receive payments. By doing so, it may protect your credit.

You cannot be forced to buy a lenders credit insurance.

Lenders may offer you the option to buy credit insurance when youre applying for an auto loan or auto equity loan, an unsecured installment loan or a subprime credit card. Banks and credit unions may also offer this option with their loans. Credit insurance is also called payment protection insurance, or credit protection. A voluntary debt cancellation addendum works similarly all these products ensure the lender receives payments if you are unable to make them.

Why Would I Sign Up For Credit Life Insurance

What Is Credit Life Insurance? : Life Insurance Tips

You would take out such a policy to protect your co-signer, who is effectively another borrower on the loan and would otherwise be responsible for the payments if you should die.

If you live in one of the nine states thats called a community property state, any assets or debts that you hold are also the responsibility of your spouse, whether they co-signed the loan or not. Credit life insurance would protect them from having to make the loan payments.

If youre hoping to protect your heirs and their credit rating, remember that they generally dont inherit your debt. Lenders know they take a risk when they loan money, and sometimes borrowers dont pay it back.

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Cancelling Credit And Loan Insurance

You can cancel credit and loan insurance at any time. Check your certificate of insurance for the steps to take.

Usually you need to contact the insurance company. Keep in mind that the insurance company is often a different company than the financial institution where you signed up for insurance.

When your coverage starts, theres usually a 20 to 30-day review period, depending on your province or territory. The review period is sometimes called a free-look or trial. During this time, you can cancel the policy and get a refund for any premiums you have paid. If you dont want credit or loan insurance you are responsible for cancelling it. After the review period ends, if you dont ask your financial institution or insurance company to cancel this type of insurance, you will continue to receive insurance coverage and be charged a premium for it.

Cost Of Credit Or Loan Insurance

When you get credit or loan insurance, you either pay a recurring premium when your loan payment is due, or a one-time premium. If youre charged a single premium, you will usually be charged at the time your loan is approved.

Recurring premiums are usually calculated based on:

  • the initial amount of your loan
  • the amount of time you will take to pay off your loan
  • average daily balance of the previous month, if you have credit card balance insurance
  • your age, your sex, and your health

In some specific circumstances, credit or loan insurance may be more affordable and provide you with the coverage you need compared to other types of individual or group insurance. This will depend on factors like your age, sex, health, the initial amount of the loan, and type of product youre getting insurance for.

Comparing the annual cost of mortgage loan insurance and term life insurance

For example, on a $250,000 mortgage with a fixed term of 5 years, at an interest rate of 5%, a 37-year-old, non-smoker woman in good health, living in Ontario would pay $600 a year to get mortgage life insurance, a type of credit and loan insurance.

To insure the same amount the woman would pay $190 a year for a life insurance policy with a 10-year term or $300 a year for a life insurance policy with a 20-year term.

Figure 1

Mortgage life insurance$600

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Pros Of A Line Of Credit

  • You’ll usually pay a lower interest rate for a line of credit than for a credit card or a personal loan
  • Depending on the product and financial institution, you may not be charged set-up fees or annual administration fees
  • To avoid unnecessary fees, if you bank with the same financial institution where you got a your line of credit, you may be able to have any overdraft on your chequing account transferred to your line of credit

Who Should Get Credit Life Insurance

Things to Consider Before You Opt for Credit Life Insurance

If you have co-signed loans or debts that will outlive you and you would have difficulty qualifying for term or permanent life insurance, a credit life policy could be worth exploring. But if you do qualify for traditional life insurance, youâll get more value for your money by buying a standard policy that pays out directly to your loved ones and can finance more than debt repayments.

“Itâs important to understand how loan insurance works,â explains Bola Sokunbi, founder and author of Clever Girl Finance. âCredit life insurance can pay off any outstanding debt if you were to pass away. However, the funds you’d use to pay for the policy’s premiums might better serve you if they are going toward reducing your actual debt obligation while you are alive, healthy, and able to work.â

For the average person, credit life insuranceâs limitations â covering only one debt, paying out only to creditors, and a decreasing death benefit â wonât outweigh the benefit of guaranteed approval. Even if you have existing health concerns, donât assume that you wonât qualify for a more affordable term life policy. An independent insurance broker like Policygenius can help you find the right company for your circumstances. If you choose the right amount of coverage, a cheaper term policy can leave your beneficiaries with enough money to both cover your debt and support themselves.

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Apply For Credit Life Insurance

  • What is credit life insurance and what does it cover?

    The lender, such as the bank, that provides you with a car or personal loan or a furniture company that extends credit for the purchase of a much-needed fridge, will either provide you with an inclusive credit life policy or you can get affordable cover from African Unity Life. Note that it is your prerogative to change or provide your own credit life policy, so remember to shop around to get the best deal. You can also read about the benefits to customers since new Regulations were passed in 2017

    If you are a pensioner or self-employed, it is important to understand that you do not qualify for this type of insurance, as you cannot claim against cover that offers retrenchment or disability cover benefits.

  • Why Should You Consider Credit Life Insurance

    It Prevents Your Loved Ones from Financial Hardship

    One of the reasons why credit life insurance is a good choice for many folks is that it safeguards your loved ones from any financial obligations if you pass away.

    Furthermore, a credit life insurance policys face value decreases in proportion with the outstanding loan amount as the policyholder pays the loan over a certain period of time. This continues until both values reach zero.

    It Gives You Peace of Mind

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    Is Credit Life Insurance Necessary To Obtain A Loan

    You’re never required to purchase credit life insurance from a lender in order to obtain a loan. If a lender ever tells you this or tries to include the cost of credit insurance in your loan without properly disclosing it, you should report the company to the Federal Trade Commission.

    While a lender may require you to have insurance on certain items that are used to secure a loan, such as your car or home, you’re free to shop elsewhere for the policy. In addition, the lender may require you to pay for private mortgage insurance if you purchase a home and your down payment is less than 20%. You can cancel PMI once you have enough home equity. Similarly, you may be required to purchase life insurance when borrowing money through the Small Business Administration.

    Why Do Members Need Payment Protection

    Life Insurance Facts : How to Get Credit Life Insurance on a Mortgage

    No one may like to think about it, but we never know when death or disability will strike. MEMBER’S CHOICE® Credit Life and Credit Disability Insurance, underwritten by CUNA Mutual Insurance Society, can be purchased to cover your loan to help reduce or pay off your loan or loan payment, in the event of death or total disability respectively.

    Your premium payments and your coverage ends when you’ve paid off your loan. This means you’re only buying the exact amount of insurance to cover your loan, so you’re not paying for any extra coverage. Each year this important coverage helps reduce or pay off covered loans for thousands of borrowing consumers and their loved ones.

    What are the benefits of MEMBER’S CHOICE® credit life insurance?

    • Reduces or pays off your covered loan balance up to the policy maximum
    • Helps protects survivor’s credit rating
    • Helps protect collateral against repossession
    • No separate payment-premium added to your loan payment
    • No complicated enrollment forms or physical exam required if enrolled within 30 days of receiving the loan

    What are the benefits of MEMBER’S CHOICE® disability insurance?

    COSTS

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