What is credit insurance?

credit insurance credit problems

What is credit insurance?

Credit insurance comes in several different forms:

Credit life insurance – the outstanding balance is paid in the event of your death.

Credit accident and health insurance – monthly credit payments are made for you during periods when you are unable to work due to accident or illness.

Credit unemployment insurance – monthly credit payments are made for you during periods when you are unemployed.

Credit insurance is a form of insurance where you are the purchaser and the lender is the beneficiary. The payments will be made directly to the lender. Though lenders sometimes offer or forward offers of credit insurance, your acceptance or rejection of credit insurance normally is not used as a factor in deciding whether to extend credit to you.

If the lender required credit insurance, the premium charged for the insurance must be included in the disclosure of the APR. In deciding whether to purchase credit insurance, consider other available forms of insurance (such as term life insurance or disability insurance) and the cost of such insurance. The credit insurance offered through your lender may not be the best deal.

(Reviewed 11.3.08)

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