Credit insurance is an optional insurance that makes your vehicle payments to your lender under certain situations, such as in the case of your death or if you become disabled. When you apply for a vehicle loan, you may be asked if you want to buy credit insurance.
Credit insurance is an optional insurance
Before deciding whether to buy credit insurance, think about your options and the cost of that insurance. If you add credit insurance to your loan, this will increase the loan amount and you will have to pay more in interest.
If you are considering credit insurance, make sure you understand the terms of the policy offered. There are four main types of credit insurance:
Life credit insurance pays all or part of your loan if you die.
Disability credit insurance, also known as accident and health insurance, makes loan payments if you get sick or injured and cannot work.
Unintentional unemployment insurance, also known as insurance against involuntary loss of income, makes loan payments if you lose your job as long as it is not your fault, such as a temporary dismissal.
Property credit insurance protects the personal property that is used to guarantee the loan; In the case of vehicle loans, it would be the same car, if it is destroyed by events such as theft, accident, or natural disasters.
If a lender tells you that you can get the loan only if you buy the optional credit insurance, you can file a complaint with the State Attorney General’s Office (in English), with the State Insurance Commissioner (in English), or before the Federal Trade Commission.
Tip: If you decide that you need insurance, there may be cheaper ways to obtain credit insurance coverage without having to buy it and add it to your vehicle loan. For example, life insurance may be less expensive than life insurance for credit, which could allow your family to pay other expenses in addition to your vehicle loan.
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