Insurance You Can Do Without – Credit Life Insurance

Credit life insurance is purchased so that the balance of your car loan or credit line would be covered if you die before your debt is paid.

As with many of the policies in the Insurance You Can Do Without series, credit life insurance in too expensive compared to the premiums for term life insurance. With a set amount such as a car loan, this is made even worse since the amount insurance declines as you pay down the loan. The reason it declines with the amount owed is that this form of insurance only protects the bank that lent you the money. If you were to die, the pay out goes straight to the bank. With term life insurance, you set an amount to cover all your debts, plus an additional amount to cover your salary or maybe your children’s education. If you’re debt is reduced before you die, the insurance payout would still be at it’s original amount, so your beneficiaries would receive a larger amount after the debts are paid.

If the cost of credit life insurance, compared to what you get for it, hasn’t made you want to cancel and sign up for proper life insurance, then this might have you getting some life insurance quotes. If you’ve ever signed up for credit life insurance, did you notice how easy it is to get it? There are rather simple, vague health questions and no tests required. If you have a pre-existing condition, this might make you think that this type of insurance is easier to qualify for than term life insurance. The problem is that if you were to die and a claim is made, the insurance company would then begin their post-claim underwriting process. This means that the insurer will decide at that point if you actually qualify to receive a payout, even though you may have been paying premiums for years.

Instead of these loan-specific insurance policies, have a look at term life insurance. You can get an idea of the prices from different insurance companies at Kanetix.

Written by Tom Drake

Tom Drake is the owner and head writer of Canadian Finance Blog. While you’re here, consider signing up for the RSS feed or email subscription. Both deliver the latest articles directly to you everyday! Have a Twitter account? Then follow me for all the latest posts or to send me any comments or questions!

6 Responses to Insurance You Can Do Without – Credit Life Insurance

  1. Glenn Cooke says:

    If you’re going to shop around for term life insurance, you should perhaps also shop around for brokers to ensure you’re seeing as many companies as possible. An alternative site for term quotes is mine at http://www.insurecan.com . You may get a different set of companies – or more companies – by doing so :).

  2. Credit insurance is expensive. I agree it is much better to get simple term insurance. It is tough for the average person to shop around for life insurance. Many Canadian looking sites are actually American. One thing people should know: Most sites that offer free life insurance quotes are owned by life insurance agents. If that agent does not represent a certain company, he or she may not display it in their quoting engine. It is best to check out a few sites. One site that is Canadian, is free, and does not exclude any companies is http://www.shopforinsurance.ca .

  3. Jeff Upshaw says:

    Thanks for the information. People should be careful about buying life insurance. One way they can do this is by getting a needs analysis to find out what kind of insurance they need.

  4. In 2004, Solutions Financial was created, to provide pressure-free buying of individually underwritten Life Insurance from competing insurance companies, by phone. Since then, we have helped countless people save money on Life Insurance often hundreds of dollars less than what they could have paid elsewhere. From the carefully selected companies we represent, we provide you with the best price for your described needs.

  5. corey banfield says:

    you guys are so right, credit life insurance is a screwjob! term insurance costs 2.00 per 1000.00 of insurance and is very inexpensive. credit life is not only expensive but i most cases the institution your getting the loan from borrows the money to buy you the insurance and then adds the cost to your loan and you get charged interest on the loan and your payment will increase anywhere from25-50.00 a month. depending on the amount financed. also staffers at the bank are not even licensed to sell these products, only in the province of alberta is it manditory to go get licensed, here in novascotia we see this type of abuse with every middle income family we help. i have had clients who have spent up to 300.00 a month on credit life, and we could give them the coverage they needed for 20.00 a month. terrible product, BUYER BEWARE!!!! your banker is not your friend HE IS A SALESMAN looking to make a commision!!

  6. Yes, credit life insurance is expensive and it is better to get Term Life insurance. If you are looking for term life insurance, it is better to contact a life insurance broker in your locality. For this, you can get in touch with Life Guard Insurance. Check out their website.

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