Do You Need Credit Life Insurance? Probably Not!
The main aim of buying a life insurance policy is to protect your dependants from financial strife in the event of your death. Your choice of a life insurance policy should therefore be economical as well as effective. Choosing the right policy will enable you to make regular payments and ensure your dependants receive adequate coverage. Term life insurance would be worth considering if youre looking for basic life insurance coverage.
There are several kinds of life insurance policies, however, and a smart salesman or an aggressive sales campaign might tempt you into buying a policy you dont really need. One of them is credit life insurance. Lets learn about what it is, and why you are better off not buying such a policy.
What is credit life insurance?
This is a type of life insurance policy that is customized for the purpose of paying off the unpaid amounts on your credit transactions in the event of your death; the most common of which are loans, mortgages and credit card bills. It works like a decreasing term life insurance policy. Credit life policies are usually offered when you make a huge financial purchase. The premiums on this policy are added to your loan amounts.
Why you shouldnt buy a credit life insurance policyCredit life coverage is quite expensive compared to term life insurance. Salesmen receive huge commissions for selling them to you.It doesnt require a medical test to determine your premiums, but it also doesnt cover pre-existing medical conditions.Your family doesnt receive the death benefit. Your creditor does.If you are older you also have to be careful not to get conned into such a policy because the policy becomes null and void at the age of 70.What you should know about credit life insurance policiesMost people are not aware that these policies are entirely optional. Pushy salespeople make it sound like they are indispensable policies that will put your family through financial mishap in the event of your death. Your family will manage fine as long as you take out a simple, no-fuss term life policy for an amount of death benefit that can cover all your dependants needs.Such policies are sold by telling people that if they pass away, their dependants will inherit the loans and debts. The truth is, your dependants are not obligated to pay these off unless their names are on these accounts next to your name. Of course, most of us are honorable enough to leave money through life insurance death benefits so that our dependants can pay off any outstanding amounts.If you have already been sold a credit life policy without your knowledge, you can cancel it and even receive a refund. It is illegal in most states for a salesperson to insist on such a policy when you make high-ticket purchases. Check with your state insurance commissioner, and if it is illegal in your state, you are within your rights to complain to the authorities.Concentrate on the important stuff.
Have you insured your life? Have you reviewed your policy lately? Is the insured amount enough to take care of your family, and will it be enough to pay off your credits and loans? In that case you are okay. However, if you find that your life insurance coverage is not enough, simply take out a fresh term life policy to make up the difference. There is no need to buy a separate credit life policy.
When you are strapped for cash, a credit life policy is a waste of money. Such policies give you the same benefit as an economical term life insurance policy but at higher rates. Instead, buy a term life policy and effectively secure your familys overall insurance plan.
by: Denise Mancini