Credit Life Insurance
Credit life insurance policies protect your assets and beneficiaries from lenders if you die before paying back a loan. Credit life insurance often doesn't require a medical exam and covers one debt at a time. Although credit life insurance won't not pay out benefits to your family, it can protect their inheritance. Credit life insurance policies are usually sold by banks rather than life insurance companies.
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Leslie Kasperowicz
Farmers CSR for 4 Years
Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...
Farmers CSR for 4 Years
UPDATED: Dec 4, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.
Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Dec 4, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.
Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Credit life insurance pays off your debts if you pass away before paying them off
- Credit life insurance only covers one debt at a time
- Credit life insurance policies are usually sold by banks rather than life insurance companies
Life insurance is an important investment that saves your loved ones from potentially immense financial burdens after death. There are tons of companies and policies to choose from, like whole, term, and universal life insurance.
Aside from these basic life insurance plans, life insurance companies offer additional policies to tailor your coverage to your needs. Credit life insurance is one of these other options.
Like basic life insurance, credit life insurance is a financial plan that benefits your loved ones in the event of your passing by relieving any debt that you may have. Because of the higher risk associated with credit life insurance, premiums are higher than basic life insurance.
Keep reading to learn more about the ins and outs of credit life insurance and why it may benefit you.
If you’re ready to compare credit life insurance rates, enter your ZIP code into our free online tool for affordable life insurance quotes in your area.
What is credit life insurance?
Credit life insurance is a type of life insurance designed to pay off a person’s outstanding debt once they pass away. The policyholder buys coverage for a specific debt (i.e., a car loan, mortgage, line of credit, etc.) and makes payments on the insurance plan.
Credit life insurance policies provide financial security to your beneficiaries from lenders should you pass away before paying off your debt.
Because it deals with debt and lenders, this life insurance policy is not usually sold by life insurance companies, but rather by banking institutions.
This type of life insurance policy can save your beneficiaries a lot of hassle and financial issues.
As with any insurance policy, comparing life insurance quotes from multiple companies will ensure that you get the best rates for the coverage you need.
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What does credit life insurance cover?
In cases of unpaid debt, the succeeding family members are responsible for paying off the remaining amount. If the amount is too much and the beneficiaries are unable to pay, the ower’s estate can be used as collateral to help pay off the remaining debt.
If you have an estate you want your loved ones to inherit after you pass away, credit life insurance will ensure it is safe from lenders.
Those left to pay your debts after you pass include your spouse, family members, or anyone that co-signed with you on a loan. Credit life insurance saves them from being left in tight situations.
How much does credit life insurance cost?
Credit life insurance is more expensive than a basic life insurance policy. It serves as an additional coverage plan sold by banks, therefore having one increases your monthly premiums.
Take a look at the difference the Wisconsin Department of Financial Institutions found between credit life insurance and term life insurance rates.
$50,000 Coverage Policy: Credit Life Insurance & Term Life Insurance Average Annual Rates| Age | Credit Life Average Annual Rates | Term Life Average Annual Rates |
|---|---|---|
| 30 | $370 | $78 |
| 40 | $370 | $92 |
| 50 | $370 | $163 |
| 60 | $370 | $321 |
As you can see, credit life insurance is more pricey than term life insurance. We recommend discussing your options before you buy credit life insurance.
What are the advantages of credit life insurance?
There are some additional advantages to credit life insurance outside of protecting your loved ones from the financial burdens of unpaid debt.
For instance, credit life insurance does not usually require a medical exam. Because this insurance decreases in value over time, insurers do not need to check your medical background or health records.
As a no medical exam life insurance, credit life insurance is more available for those with a hindering medical background.
Additionally, debt is a factor on which insurers decide your risk level and calculate your life insurance premiums. The National Association of Insurance Commissioners(NAIC) claims that debt holds 30 percent of the weight of insurance companies’ decisions on your risk level.
Therefore, taking advantage of a credit life insurance policy can help eliminate some of that debt for you or your loved ones.
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What are the disadvantages of credit life insurance?
Although credit life insurance has many advantages and benefits, there are a couple of persisting disadvantages.
Because it is added to your current life insurance policy and decreases as you make payments, credit life insurance is more expensive than a basic whole or term life insurance policy.
In some cases, a credit life policy is not completely necessary and ultimately is not beneficial for the amount of money paid for it.
Another disadvantage to credit life insurance is that it only covers one specific debt. If there is more than one outstanding debt, you will have to get more than one credit life insurance policy.
We recommend talking with an insurance agent before you buy credit life insurance so that you know you are making the best decision for you and your loved ones.
Credit Life Insurance: The Bottom Line
Credit life insurance policies can help tremendously if you have any outstanding debt passed on to your loved ones. It is not, however, beneficial if you have multiple lines of debt.
We highly recommend discussing your options with an insurance agent before buying a credit life insurance policy. Similarly, if you choose to buy one, comparing multiple credit life insurance quotes from a few different companies will give you the best rates and coverage.
Not yet ready to buy credit life insurance? Enter your ZIP code into our free online tool to get instant, affordable life insurance rates in your area.
Your one-stop online guide for life insurance quotes. Get free quotes now!
Secured with SHA-256 Encryption
Leslie Kasperowicz
Farmers CSR for 4 Years
Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...
Farmers CSR for 4 Years
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.