You probably have already got auto insurance and homeowner’s insurance policies. And you’re also likely covered by insurance and life assurance . you’ll even have pet insurance for your furry friends. So, it begs the question: does one need credit life assurance , too?
Let’s clear up a number of the confusion and misinformation that exists about this little-known coverage policy. Read on for all you would like to understand about credit life assurance .
Credit life assurance isn’t life assurance
Their names are nearly identical, and both sorts of insurance policies make payouts within the event of a death. But that’s essentially where the similarities end.
Life insurance covers the policyholders and makes payouts to their survivors upon their death.
Credit life assurance covers an outsized loan and benefits its lender by paying off the rest of the loan if the borrower dies or is permanently disabled before the loan is paid fully .
Here’s how it works: A borrower takes a mortgage on a replacement home and opens a credit life assurance policy thereon loan. The borrower pays a monthly premium toward the policy, which is usually rolled into their monthly loan payments.
If the borrower becomes permanently disabled or passes away before the mortgage is paid off, the credit life assurance policy can pay the rest of the loan fully . The title of the property will then be transferred to the borrower’s estate, and eventually to their beneficiaries and heirs.
This way, the borrower’s family doesn’t got to worry about covering the mortgage payments after the policyholder has passed on.
Credit life assurance is merely offered by lenders on large loans, like home loans and auto loans.