Credit Insurance...
What is credit insurance and how can you buy it?
Whenever you apply for credit,
the creditors will ask you if you wish to buy credit insurance. Some creditors may also include it in your loan proposal. Before purchasing credit insurance, you must gather sufficient knowledge of the different types of policies available and the benefits offered by them.
What are the major types of credit insurance?
There are 4 types of credit insurance that insures payment of credit extended to you when you are unable to repay them due to different situations. These are:
- Credit life insurance: This insurance policy pays the amount owed by you when you die, provided the beneficiary of the policy is your creditor.
- Credit disability insurance: This type of insurance policy covers the minimum payment if you become medically disabled. But it does not pay for credit obtained by you after you become disabled.
- Credit involuntary unemployment insurance: This policy is also known as involuntary loss of income. It makes the payments due on your loan account if you are laid off from work without any fault of your own.
- Credit property insurance: This insurance protects the personal property that you have used to secure your loan incase it gets destroyed in the event of theft, accident or natural disasters.
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| How to Buy Credit Insurance
Before buying a credit insurance policy, first assess your current and future credit needs. Then find out the following from your creditor:
- The premium cost: Ask your creditor how much is the premium and what will be your monthly loan payments if you do not purchase the insurance.
- Length of coverage: Find out if the insurance will cover the full length of your loan and the full loan amount. You must also verify if there is a waiting period before the coverage becomes effective.
- Insurance cancellation: You must find out when and how you can cancel your insurance and also what kind of refund will be available.
When you sign papers for obtaining credit, read carefully. See if charges for credit insurance are included in your monthly payments. If you do not want it, ask the creditor to remove it. If the creditor does not, report him to your state attorney general or the Federal Trade Commission.
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