What is credit life insurance on a car? There are different insurance coverage plans you can get on your new car; even if you bought a used car, there are conditions to get the car insured, and of course, there are many plans you would get to choose from.
Credit life insurance is increasingly becoming a handy add-on package for many people picking up auto insurance plans.
This type of insurance takes care of your remaining loan debt(s) when you die or, maybe, get disabled along the line – being unable to pay off the loan(s) you took.
Since no one can predict what will happen in the future, credit life insurance can save your family the burden of trying to pay off your debt(s) when you pass on.
This article clearly explains the meaning of credit life insurance and how it works as part of auto insurance plans.
What Is Credit Life Insurance?
This is an insurance coverage type that covers your outstanding debt(s) when you’re entirely unable to do that – when you’re dead or incapacitated/disabled.
Different issuers have variable terms and conditions for offering credit life insurance coverage.
However, it is important to note that “Credit Life Insurance” is not the same as “Life Insurance.” They are two different types of insurance coverage.
Going for credit life insurance on a car means you took out a large loan to do business or purchase the car (car loan); this insurance type covers the remaining debt to be paid to the lender when you’re dead or disabled.
If you took out a small loan, you probably wouldn’t qualify for credit life insurance coverage; in essence, not everyone needs credit life insurance.
The cost of this insurance coverage depends on the amount of loan you took – it’s not static, and there are several conditions that apply.
How Does Credit Life Insurance Work?
This type of insurance policy exists to pay off outstanding debts when a borrower dies or becomes incapacitated.
It is not the same with life insurance, and it mostly applies when you take out a large loan (home loan, business loan, car loan).
Most lenders also offer this type of coverage – you may be asked to add it to your package when going for a large loan.
This insurance coverage is quite useful and comes in handy to not burden your loved ones when you pass away – especially when you’re the family’s breadwinner.
This insurance protects your co-signer on your mortgage (loan) – the person won’t be obliged to pay off the remaining balance of the loan when you’re gone.
What is Credit Life Insurance on a Car?
Put simply, credit life insurance on a car is a type of insurance policy that covers the remaining part of your vehicle loan when you die or become incapacitated – no one else would be tasked with paying off the debt.
This usually applies when you buy a very expensive car on loan – most dealerships offer this insurance coverage plan.
How Much Does Credit Life Insurance Cost?
The cost vary based on your outstanding debt. The higher the outstanding debt, the more you’d pay for credit life insurance.
Actually, the cost of credit life insurance decreases as you pay down your loan; this implies that you would be paying lesser fees every month as you continue to repay the loan that made you carry the package.
Choosing this insurance package is voluntary – your dealership shouldn’t force it on you – and the application procedures do not include taking a medical exam.
Some dealerships may automatically add credit life insurance to your vehicle loan package, so ensure to ask them about it and demand explicit explanations.
Should You Carry a Credit Life Insurance on a Car Loan?
It’s a personal decision; most people who carry this insurance coverage do so because they don’t want their heirs or co-loaners to be burdened with huge debts when they (the actual borrower) lose their job, become disabled, or die.
So, you have to think it through to determine if you should go for this insurance plan. Also, if you’re the breadwinner of the family, you really should consider this insurance to protect your family (wife, kids, parents, etc.) from heavy debts.