Credit life insurance is a type of decreasing term life insurance that pays off your debts if you die. It decreases in value over time, but it will always pay your debt off.
How Credit Life Insurance Works
Credit life insurance is something that you can buy from a bank when you get a mortgage (mortgage protection insurance). The reason people have credit life insurance is that it will pay off your loan if you die, and the money comes from the insurance company. So if someone else co-signed for your mortgage, then this person will not have to make payments on the loan.
Most heirs who are not co-signers on your loans will not need to pay off your loans if you die. This is because debts are not inherited, but there are some exceptions. For example, the few states that recognize community property might make the spouse liable for the debt, but the children will not be liable.
When banks loan money, they know that the person who borrows it could die before the loan is paid off. The bank accepts this risk. Credit life insurance protects the bank, not your family members. If you buy a credit life insurance policy, it will pay back to the bank and not your family members.
Related Reading: What Is a Collateral Assignment of Life Insurance?
What are some of the benefits of having credit life insurance?
There are many benefits to having credit life insurance, including peace of mind, protection for your family, and financial security. Credit life insurance can help pay off your debts in the event of your death, so your family is not left with a large financial burden. It can also help pay for funerals and other expenses. If you have a term life insurance policy, it can provide coverage for a specific period of time, usually 10-20 years. This can be beneficial if you are young and have a family that depends on your income. Whole life insurance policies provide coverage for your entire life and can build cash value over time. This can be used as a source of financial security in retirement or for other purposes.
How much does credit life insurance cost?
The cost of credit life insurance depends on many factors, including your age, health, and the amount of coverage you need. Generally, the younger you are and the healthier you are, the lower your premiums will be. The amount of coverage you need will also affect your premium. Contact us to get a life insurance quote for the coverage you need.
Credit Life Insurance Alternative
If your goal is to prevent a spouse from becoming responsible for your debts after you pass away, term life insurance may be a better option. When you die during the policy’s term, the value of the policy will be paid to your partner tax-free. They can then use some or all of the money to pay off debt.
No Medical Exam Needed
Credit life insurance does not need as strict health screening as other types of life insurance. This is called guaranteed issue life insurance. However, different types of life insurance require a medical exam, and the rate for these will be higher if you are older.
Need Help Getting Life Insurance Coverage?
Feel free to contact us if you need help purchasing a life insurance policy. The service is free of charge.
Frequently Asked Questions
What type of life insurance are credit policies issued as?
Credit life insurance policies are most commonly issued as whole life insurance policies. However, they can also be issued as term life insurance policies.