Drop Your Credit Life Insurance

When you take out a loan to purchase a car, you are often “strongly encouraged” to buy credit life and/or disability insurance connected to the loan.  My advice on both of these options is to say, “No thanks!”  Credit life is a very expensive form of life insurance that is paid up-font for the life of the loan.  It will pay off the loan if something happens to you.  However, the price is usually very high because there is no underwriting associated with it – which means that there is no medical check-up required to qualify for the coverage.  As a result, healthy people have to pay more than they should to make up for claims by unhealthy people.  Besides, the premiums are paid up front and are usually just added to the loan, which means you are paying interest on insurance premiums.

This is also the case for disability insurance that is added on to your loan, as it’s a single-pay premium, too.  You can get better rates by owning your own term life insurance and long-term disability policy.  These costs less and provide better protection.

If you already have these types of insurance as part of a loan, write a letter requesting the canellation of het coverage and they will send a refund check to the bank to be applied to your loan balance.  Although your payments probably won’t change, the length of time to pay the loan will be considerably reduced.

I also encourage my clients to cancel these types of insurances on any credit cards they have and to make sure their personal term life and long-term disability policies are paid up.  Paying off these types of debts in the event of your death is part of what your term life insurance is for.