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Credit life is a style of coverage usually carried by the seller of high dollar items. The amount reduces with
the loan balance to cover that balance if the purchaser dies. The purchaser is not required to accept the plan offered by
the selling company. The seller can require some form of life coverage that can be attached be in place in order
to extend the loan.
There are not as many restrictions to qualify for credit life as in regular term life
policies. Usually the only two requirements are that the purchaser not have any serious injury or medical problem within 3,
5 or even as many as 10 years and not have serious credit problems in that amount of time.
The purchaser may
consider if he already has enough coverage in place from other sources that can be assigned to that loan and preclude the
requirement of credit life. An assignment is just what it sounds like, to assign part of proceeds from a life insurance
policy.
Credit life usually has a disability provision that waives the payments on the loan for the term
of the disability. A waiting period is attached to cover the time a person may be covered by other payments because of the
disability. Also a provision for unemployment is included for full time employees in manpower reduction cases. Part time workers
are not covered by this provision so a guideline of working at least 30 hours per week is required to qualify as a full
time worker. These provisions for disability and unemployment are offered as endorsements to the credit life policy and may
in many cases be rejected. And of course it costs extra to have them.
There are limits to the amount of credit
life insurance you can buy that are set by the state and in some cases the limit will not cover the full loan amount. The limit
for mortgage loans are different to allow for higher limits. This should be a red flag to most if the price of an item
is higher than the limit set by the state except for the consideration that there is a middle ground area where
the cost of an item is in the range for more monied people that wont be required to purchase credit life because of personal
wealth. Otherwise, a person pays more for an item at their own risk. It would not be unreasonable for a seller to require
a down payment or a higher down payment if an item is priced higher than the state limit for credit life coverage.
Credit life can be paid in single premium or monthly installments. There is savings by paying single premium but it is very
little.
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