- Protect your Heirs from Debts
- Cover your Outstanding Loans
- No Medical Test Required
What is Credit Life Insurance
Credit Life Insurance is a type of life insurance that covers the cost of your outstanding loan in case of your unfortunate death. If you unfortunately die before the loan is fully repaid under the terms, your loan shall be paid by the insurer.
Cover your outstanding loans. Repay outstanding loan on borrower demise. Ensure your dependents do not inherit your debts.
It is ideal if you have a co-signer on the loan or dependents who rely on the collateral asset, such as a home, car, etc. To put it simply, in this policy, your debts are generally not inherited. A credit life insurance policy’s death benefit decreases as the policyholder’s debt decreases over time until there is no remaining loan balance.
The coverage and benefits of credit life insurance can vary depending on the policy and the amount of coverage you choose. Please note that the payout on a credit insurance policy goes to the lender, not your beneficiary.
How Credit Life Insurance Works
Let’s understand this with an example:
Varun has a home loan and purchased credit life insurance for it.
After 5 years, he passed away due to an accident before paying off his home loan.
In this case, the credit life insurance will pay the remaining balance directly to the lender instead of leaving the debt to his dependents.
Benefits of Credit Life Insurance
No Medical Examination
Credit life insurance does not require medical examination because it is simply a loan protection plan that pays off the outstanding debts in case of your demise.Protect your Heirs from Debts
Credit life insurance ensures borrowers that if something happens to them, their dependents won’t be burdened with the outstanding loan.Not Mandatory
Whether you want to opt for a credit insurance policy is up to you. Lenders cannot force you to opt for credit life insurance or influence lending decisions based on acceptance.Loan Integration
Credit life insurance can be added to a loan, which might raise your monthly payments. It’s best to ask your lender about getting credit life insurance for any big loan you take out.Loan Coverage
The policy will pay off the remaining debts if the borrower dies before the debt is fully repaid. It ensures that the borrower’s family is not responsible for the debt.
Beneficiary of a Credit Life Policy
A credit life insurance policy beneficiary is the lender who provides funds for the insured debt. The payout on a credit insurance policy goes to the lender, not your beneficiary.
How Much Does Credit Life Insurance Cost?
The credit life insurance cost depends on the outstanding loan amount and the type of policy you purchase. The higher the outstanding loan amount you need to be covered, the more it costs to insure. A credit life policy typically costs more than a pure-term insurance policy.
What to Consider Before Buying Credit Life Insurance
It would be best for you to consider your needs, options, and costs before buying credit life insurance.
- If you already have the term or whole life insurance policy, it would cover the debt if you passed away. So you do not have to worry about outstanding loans even if you pass away.
- Compare the premiums of credit or term life insurance policies. In case you’re older or in bad health, credit life insurance might be a cheaper option for you to obtain.
- Check out the limits or exclusions of credit life insurance policies before buying.
Other Options You Can Opt Over for Credit Life Policy
If you’re afraid that your family may have to bear the burden of your outstanding loan after your demise, you can opt for term life insurance. A few alternatives exist, such as whole life insurance or even simple savings and investment plans. A credit insurance policy might cost you more than a term plan, and it offers few benefits. On the other hand, term life insurance offers high life coverage at affordable premiums, and the benefit amount will be paid to your nominee instead of the lender.
Conclusion
A credit life insurance pays off the remaining balance of a borrower’s outstanding debt if they pass away. You can purchase it from the bank when you take out a loan. It is ideal if your spouse or family members are co-signers on the loan because you can protect them from having to repay the debt. It’s best to consult your lender financial advisor about getting credit life insurance for any big loan you take out.
For further assistance regarding credit life insurance, you can consult with our financial advisors and get personalized service free of cost. You can easily reach out to us through the website policyx.com or give us a call at 1800-4200-269.
Credit Life Insurance : FAQs
1. Is it mandatory to opt for credit insurance?
Whether you want to opt for a credit insurance policy is up to you. Lenders cannot force you to opt for credit life insurance or influence lending decisions based on acceptance.
2. Can I cancel my credit insurance?
Yes, you can cancel your credit insurance policy, but you must check our policy terms & conditions.
3. Why is Credit Life Insurance Important?
It is important because it will cover the debt if you pass away. So your family does not have to bear the burden of your outstanding loan after your demise.
4. What are the pros or cons of a credit life insurance policy?
Credit life insurance ensures borrowers that if something happens to them, their dependents won’t be burdened with the outstanding loan. On the other hand, it might cost you more than a basic term plan with few benefits.
5. Where can I purchase credit insurance?
You can purchase credit insurance through various insurance companies, banks, or credit unions. For instance, banks, finance companies, credit unions, credit card companies, retail outlets, automobile dealers, appliance stores, furniture stores, etc.
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Written By: Himanshu Kumar
Himanshu is a seasoned content writer specializing in keeping readers engaged with the insurance industry, term and life insurance developments, etc. With an experience of 2 years in insurance and HR tech, Himanshu simplifies the insurance information and it is completely visible in his content pieces. He believes in making the content understandable to any common man.
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