If your financial planner suggested that credit insurance could be good to have but you’re not sure because you don’t know a lot about it, read this article.
The intent of this article is to help you understand what credit insurance so that you can ask your financial planner or lender the right questions.
This insurance is the type of insurance you don’t think you need until you can’t make the payments on your auto loan or mortgage then you’re glad you have it. This type of insurance will pay for your loans when you are unable to.
Credit insurance can be a good thing if you worry about the possibility of losing your home or auto because you can’t make the payments. It usually doesn’t cost a lot and could save you money in the long run.
Credit Insurance 101
What You Use Credit Insurance For
- To make your loan payments if you are sick.
- To make loan payments if you are injured.
- If you lose your job and can’t make your loan payments without credit insurance picking up the payments, you may lose your home or your auto.
- To pay off loans if you should die before they are completely paid off.
What You Need To Know
- Credit insurance is an optional coverage when applying for a loan. A lender cannot make credit insurance a mandatory coverage, that would be illegal.
- If your lender tells you that to comply with the law you must have credit insurance on your loan, they are wrong. The lender must ask you if you want credit insurance included in your loan.
- The lender cannot make you purchase credit insurance without your permission. It is also against the law to include credit insurance in a loan with your knowledge.
Questions To Ask
Cost of the Loan
Ask your lender to quote you on what your monthly loan payment would be with and without credit insurance included. You must know this before you sign the application.- You want to save money not waste it, so ask up front what the costs will be.
Coverage on Full or Partial Loan
- Some lenders only offer partial loans.
- Ask at the time of the loan application whether the credit insurance will cover your full loan or just a portion of the loan.
Cancellation Policies
- What are the lenders refund policies if you cancel the insurance.
- The lender can charge a flat cancellation fee or a fee that is a percentage of the loan.
- Be sure to ask up front, what the cancellation policy is.
