Credit life insurance is a life insurance policy that pays back all the money you owe after you die. The value of this insurance policy is the amount you owe. Hence, as you pay off your loans, the value of the policy reduces. When you are done paying your loans, the value of the policy is Zero. If you are wondering if this life insurance policy will help you, below are the pros and cons of a credit life insurance policy.
Pros of credit life insurance
- Your family does not have the problem of paying back any debts you owed before you died. This policy is especially important if you shared any debts with your spouse.
- The life insurance provider pays the money you owe to your creditors directly.
- You will not need to take any medical tests to buy this life insurance policy. The fact that you owe money qualifies you to buy a credit life insurance policy.
Cons of credit life insurance
- The value of your policy will reduce over time. However, you will keep paying the same amount as premium. The reason your policy value reduces is that you only have coverage for the amount you owe.
- Your family will not receive any death benefits with this life insurance policy.
- Credit life insurance costs more than regular life insurance policies because there is more risk attached to it.
- You can profit more from a traditional life insurance policy. With a traditional life insurance policy, your beneficiary can pay any debts you owe and still have some money left to use as they wish.