How To Decide if Credit Insurance Is Right for You
The decision to purchase credit insurance is an individual one and must be tailor made to the individual’s credit picture, and the likelihood that his or her earning capacity may be interrupted. It is obvious that if you have little of no debt, credit insurance is not for you. But for most Americans who routine carry a debt load that includes a car and several credit card lines of credit, credit insurance may be in order. If the individual’s place of residence, whether it is a house or a condominium apartment is mortgages, then either credit or mortgage insurance is a necessity.
The amount of savings an individual has is another important factor. If the individual has enough savings to cover the monthly payments on the existing loan balances, this may be a more cost effect alternative than credit insurance which does result in another extra payment per month. And, like all insurance, it is a payment for a fund that may never become relevant and never been drawn upon... For this reason, if the individual has savings equal to the balances of the loans and has other disability and health insurance that will pa< benefits in the case of loss of income, the cost of a credit insurance premium may not be advised.
Another factor in the decision for or against buying a credit insurance policy is job stability. Of course, most employees are unaware of the status of their company but in some cases, there are rumours and significant downsizing events. In this case, it would be wise to anticipate a downfall in the corporate status and get the protection you may need in the event your job is terminated.
One’s health is also an unknown, but as a person ages, especially if he or she is diagnosed with one or more risk factors for a significant health problem, it may be a prudent move to seek the protection offered by credit insurance. For example, since both high cholesterol counts and hypertension are risk factors for heat disease and stroke, an individual diagnosed with one or both of these conditions, although in current good health, made want additional protection.
Before buying credit insurance you should evaluate what coverage you already have and avoid duplication. Credit insurance could duplicate existing life and disability coverage. Also, the consumer should know the premium for credit insurance is often included in the total amount of the loan or credit, which means that it accrues interest and makes it a more expensive cost than quoted. This means a $200 monthly premium issued by a credit card company may have as much as $38 additional in interest added on per month.
by Sally.Anderson 19 years ago