Guest Post: The Pros and Cons of Credit Insurance

US-PDGov

By: Susan Wells

For those of us who are less informed on financial matters, the phrase "credit insurance" sounds like a mash of financial buzzwords with questionable meaning. But, as consumers today are striving to become more and more informed on matters of money and finances, it is important to understand what credit insurance is and what its uses are. The next time you apply for a mortgage or a personal loan, the lender may ask you if you want to buy credit insurance (in some cases even, credit insurance is included in the loan proposal). Credit insurance protects the loan on the chance that you are unable to make your payments. This insurance is optional, but can be beneficial in certain situations.

The Types
There are four different varieties of credit insurance. These include credit life insurance, credit disability insurance (or accident and health insurance), involuntary unemployment insurance (or involuntary loss of income), and credit property insurance. Credit life insurance pays off all or some of your loan in the circumstance that you die before it is paid off. Credit disability insurance makes payments on the loan if you become severely ill or insured and cannot work. Involuntary unemployment insurance makes loan payments if you lose your job due to something that is no fault of your own. Credit property insurance protect personal propertied used to secure the loan if it is destroyed by events outside of your control (theft, accident, natural disaster).

The Pros of Credit Insurance
There are several pros to having credit insurance like the types mentioned above. In the case of an emergency these lines of insurance can be extremely helpful. The purpose of credit insurance is to help protect both you and lenders in unfortunate circumstances. With credit insurance, you will not be expected to pay loan amounts that you are unable to pay due to specified situations that may occur in life. Likewise, these lines of insurance help protect lenders from not receiving loan payments. A good credit insurance policy can help you avoid issues of bad debt and credit score damage.

The Cons of Credit Insurance
As with any insurance, with credit insurance consumers have to pay a premium. Insurance bodies are giving you there services in case of unprecedented complications and expect some payment for that. Premiums can cost a lot and should be something you look into carefully when examining whether credit insurance is right for you. Is paying a premium for insurance on credit better for your situation than just using that money to pay the loan back? This is something you'll have to decide after exploring your options and understanding your own financial situation.

Susan is a freelance blogger who enjoys writing about automotive and health news, technology, lifestyle and personal finance. She often researches and writes about automobile, property and health insurance, helping consumers find free insurance quotes and the best protection available. Susan welcomes comments.