Debt Cancellation Insurance Is an Alternative to Credit Insurance
Like many of us you have probably wished at some time that all of your debts were cancelled. New types of insurance may make this no longer a pipedream, but a reasonable alternative to credit insurance.
Within the existing format of credit insurance the coverage works on the following way. If, after buying a policy from a lender, the policy holder losses his or her income, the insurer will continue to make the usual monthly payments to a total of up to 80 % of the balance owed. The payments will continue whether the insured is temporarily or permanently unable to work until the maximum amount is reached. In the In the event of the insured’s death, payments are made under the policy until the specified limit is reached.
New forms of insurance that address the of the large debt burdens carried by many people, especially Americans. Are now being offered by insurance companies in the United States. This insurance is designed to handle the problem of dealing with a large debt balance in the case of disability or death of the individual and protect the insured’s assets and way of life. It also protects the lenders who stand to loose considerable sums of money if a creditor defaults on a loan or goes bankrupt.
Traditionally, credit insurance is sold by the individual lender in connection with a loan or line of credit. However, a new form of insurance is being offered by insurance companies who normally sell life and disability insurance. In this instance debt cancellation insurance is bundled together with an accidental death, disability and involuntary unemployment insurance coverage. In the event that the insured cannot pay, the debt is cancelled. In reality the insurance company pays off the entire debt, or an acceptable amount. It may be able to negotiate a lower pay off amount due to the amount of savings in administration costs. Most large purchases are financed for 5 to even ten years and an immediate, bulk payoff saves just that amount of billing costs and interest. It also clears the slate and allows the car dealer to close the account, and makes the funds available to finance another customer’s purchase.
Many feel that this product is more profitable than credit insurance. To the policy holder, it is often a better deal since the debt, regardless of the amount of the negotiated payment is cancelled, rather than just having payments made. Also these payments only address of portion of the total balance which continues to accrue interest.
by Sally.Anderson 19 years ago