If you’ve ever taken out a personal loan, you may know there are insurances, some of which are required, on the loan. These payment protection plans are designed to safeguard both the lender and borrower. The insurances available may vary from state to state. Below is a brief description of some of the coverages.
Features and Benefits of Credit Insurance
There are several features and benefits to having credit insurance or payment protection.
- No medical exams or questions are required
- The premium is included in the monthly benefit
- There is no down payment, no out of pocket deductibles or expenses
- Offers protection in a time of unforeseen need
- You only pay for the coverage amount needed
- It protects your assets
- Affordability and Convenience
- Protects your credit rating
Depending on your age, life insurance may be required on your personal loan. According to the Plateau Group, “30% of U.S. households have no life insurance at all.” In short, credit life insurance pays the balance of the loan if the customer passes away. Two different types of life insurance are single life level and single life decreasing. In the event of death, single life level will pay off your loan balance and your beneficiary will receive any residual amount. Single life decreasing will only pay off the loan as a benefit.
This is commonly referred to as Accident and Health Insurance or A&H. If you become disabled, per a doctor, due to sickness or injury during the loan, disability insurance will provide benefit payments to the lender during this time. There may be a waiting period, but the coverage is retroactive.
Dual Property Insurance
This will protect both the lender and the borrower’s interest in the event there is a covered loss of items used as collateral. This would be a result of fire, flood, etc. If the collateral is destroyed, the insurance will pay the value of the property toward the loan balance.
Vehicle Single Interest (VSI)
If you are using a vehicle title to help secure a loan, it protects the lender against physical damage or loss of collateral. Just like property insurance, insurance will pay the value of the property toward the loan balance.
Involuntary Unemployment Insurance (IUI)
This payment protection is designed to protect you if you become involuntarily unemployed during the term of the loan through no fault of your own. This would include being laid off for example. This coverage is optional for those that qualify where available.
In short, credit insurance or payment protection offers peace of mind, and protects your assets and credit in times of unforeseen need. The affordability and convenience of not having any out of pocket costs or deductibles, not having a medical exam, and the overall protection it offers makes it easy to see why it can benefit you. As always, contact a qualified lender if you have any questions!