What is credit life insurance and who needs it?
A type of credit life insurance policy is designed to pay off a borrower’s outstanding debts in the event of the policyholder’s death.
It is typically used to guarantee your ability to repay a substantial loan, such as a mortgage or auto loan.
As the loan is paid off over time until there is no longer a loan balance, the face value of a credit life insurance policy decreases in proportion to that amount.
The most important points to remember are that credit life insurance is a specialized type of policy that is designed to pay off specific unpaid debts in the event that the borrower dies before the debt is fully repaid.
The term of credit life policies coincides with the loan maturity.
A credit life insurance policy’s death benefit decreases with the policyholder’s debt reduction.
Underwriting requirements for credit life insurance policies are typically less stringent.
