What is Credit Health Insurance?
As a country, we love to buy things on credit. From automobiles to appliances, laptops to lawnmowers, Americans use an exorbitant amount of credit. According to Experian, in 2021, the average person holds over $96,000 in non-mortgage debt.
With so much money at stake, it may be worthwhile to consider insuring yourself in the event you are unable to repay your debt because of illness or injury. This is where credit health insurance might make sense.
Credit insurance is an insurance policy directly connected to a loan, credit card, retail purchase that is financed, or other debt. The policy pays all or a portion of the outstanding debt if an event named in the policy occurs, such as death, disability, or involuntary unemployment.
It is important to note that the insurance company usually pays the money directly to the creditor or lender. Additionally, dollar-for-dollar, credit health insurance is not inexpensive. Before purchasing credit health insurance, here are a few questions you should ask yourself first:
- What are the limits or exclusions associated with the policy?
- Will the credit insurance cover the entire amount of the loan? If you cancel or pay off the debt early, will you receive a refund?
- What is the waiting period that must be met before any benefit will be paid?
- Do you have another insurance policy that can be used to pay the debt, such as life or disability insurance?
- Do you have savings or investments you can use to pay the debt without impacting other financial obligations or goals?
- Do you pay the premium monthly or will it be financed and added to the total amount of the loan, which would increase the policy’s overall cost?
In many cases, purchasing life and disability insurance policies not tied to any debt may be your best option. Individual policies give you and your family the choice of how best to use the benefits, which in some cases may not be to pay off a debt or loan.
To learn more about your options to protect your financial position from an unexpected death or disability, contact my office today.