What is credit life insurance? This insurance policy is purchased by a mortgagor, in order to ensure that the property is safe just in case the mortgagor dies. The credit life insurance will pay the outstanding amount of the loan in this case.
Some of the common examples of the debts where you may find this type of coverage would be credit card loans, automobile loans, or any other revolving account from furniture stores, departmental stores, etc. In this article, you will be able to know the basic details of what the credit life insurance is.
How Does it Work?
Despite the fact that there is an additional cost involved, many credit life insurance holders are of the view that this is a good investment for the protection of the rest of the family. If the mortgagor dies, the policy will pay the outstanding balance and the family will be able to keep the home.
A credit life insurance policy will pay off the remaining amount of the loan, thereby protecting from any possible risk of foreclosure. Some countries or states may impose a limit on how much of the remaining balance can be protected through this policy but often this amount is higher than the average value of a home in the area, which means borrowers will be protected if a claim is to be filed.
Is It Affordable?
Borrowers could find it an extremely viable options, mainly because it is one of the most affordable life insurance options available in the market. A lot of factors make it highly affordable and cost-effective. First, it is simply a term life insurance policy, which only lasts the length of the loan. Second, as the price of liability decreases each month, there is less risk for the insurance company to cover.
This type of insurance policy can be bought independently, but lenders may offer a borrower a better price than they can otherwise acquire. Lenders generally buy these policies in bulk mainly because the of the number of policies they want to sell. Likewise, there is a pre-existing relationship between lenders and insurance providers.
In addition to home mortgage, the credit life insurance policy can also be bought for a variety of other loans, both secured and unsecured. Getting life insurance policies for credit card loans and automobile loans are other common options.
Although this type of insurance policy does not require medical examination, the qualification is not confirmed. Most companies require you to fill out a medical questionnaire, in addition to age restrictions and work requirements. Making any false claims could result in the claim being voided.
With that said, you need to research well when shopping for a credit life insurance policy. Chances are that you may come across a number of options, but you ought to choose one that can match your specific requirements. Be sure to read through the contract to ensure that your rights are fully protected. Thus, you are advised to keep all of these aspects in mind when looking for the best insurance policy.
Understand more: What is Supplemental Life Insurance?