A new feature popping up for credit lines is called credit insurance. The purpose of the insurance is to cover any remaining balances in the event of death, disability, or unemployment. But do you really need credit insurance, and is it something that you should consider tacking on every month?
Here is everything you need to know about credit insurance.
What Is Credit Insurance?
Credit insurance is just that, insurance tacked onto an existing credit line to ensure that the lender gets its money. It’s an optional feature that gets added to your balance every month to create a nesting spot in case of economic hardship.
Not everyone needs credit insurance, as most individuals already have insurance. The only time credit insurance may be different is when it comes to unemployment. Instead of you having to pay the minimum balance, the insurance company does instead.
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What Are the Different Types of Credit Insurance?
There are three main types of credit insurance. The first two are standard life and disability insurance.
With life insurance, the goal is to pay off any remaining debt and loans that are currently taken out in your name in the event of your death. This ensures that debtors can’t try and trick your family into paying off the debt instead of you.
Disability insurance works as a form of payment if you become disabled. You may need to get classified as disabled first before claiming this type of credit insurance. This waiting period can be quite a while, so don’t count on it right away.
Should You Get Credit Insurance?
Not everyone needs credit insurance. For instance, you might already have a life insurance policy set up to cover those debts or loans. This would make the credit insurance worthless.
For disability insurance, you might qualify for government benefits, but it might take a long time. Disability in itself can be a tricky road to navigate.
For those that are constantly in and out of work, like freelancers and contractors, credit insurance that offers unemployment insurance will be the best possible option. You might have to wait 30 days or so before the insurance company takes over the payments, so try at least to meet that minimum payment for a month or two.
Credit Insurance: It Might Just Help You Out
Tacking on credit insurance to your reoccurring credit cards can help you out if life takes a turn for the worse. Whether it be sudden death or sudden unemployment, the goal is to ensure that your debts continue to get paid regardless of if you have the money or not.
If you want to learn more about how credit cards and finances work, be sure to check out the rest of the blog. If you know someone that would find credit insurance helpful, be sure to share this article with them.