Credit insurance is a type of insurance policy purchased by a borrower that pays off one or more existing debts in the event of a death, disability, or in rare cases, unemployment.
How Does Credit Insurance Work?
Credit insurance can be a financial lifesaver in the event of certain catastrophes. However, many credit insurance policies are overpriced relative to their benefits, as well as loaded with fine print that can make it hard to collect.
Three Types of Credit Insurance
There are three types of credit insurance, each paying its benefit in different ways:
- Credit Life Insurance: This type of life insurance pays off all outstanding loans and debts if you die.
- Credit Disability Insurance: Also called accident and health insurance, this type of credit insurance pays a monthly benefit directly to a lender equal to the loan’s minimum monthly payment if you become disabled.
- Credit Unemployment Insurance: With this type of insurance, if you become involuntarily unemployed, this insurance pays a monthly benefit directly to the lender equal to a loan’s minimum monthly payment.
You must remain unemployed for a certain number of days before a benefit is paid. In some cases, the benefit is retroactive to the first day of unemployment. In other cases, the benefit begins only after the waiting period is satisfied.
If you would like additional information or have questions, contact The Whitlock Group today!