Life Insurance for Loans is a Good Thing

Protect your loan – Protect your future

Taking out a loan for a car doesn’t mean placing a burden on yourself. Sometimes it is simply the best option on the table. But in the event of tragedy, such loans can place an unnecessary burden on your estate. Committing yourself to making regular car payments is one thing; committing your family to making good on your promises after your death is another. Thus, making sure your family has a good plan in case of emergency is a logical step to take when buying a new vehicle.

The Lowdown on Credit Life Insurance

The best way to avoid such a burden is to consider pairing your vehicle purchase with a credit life insurance policy. When buying a vehicle, insurance is a way of securing your purchase against the unexpected: the loss of employment, a serious injury, or death. Credit life insurance on your car loan means that in the event of death, a beneficiary of your choice receives the car without making any further payments on the vehicle. The considerations are similar to term life insurance in that credit life insurance offers a sound method for protecting loved ones from financial burden in case of death. The amount of relief and joy that your family will receive in a time of grief is worth signing up for the Life insurance for your loan at the time of purchase. Just picture your loved ones smile as they receive the call that you were covered.

Term life insurance and credit life insurance differ in two key areas

First, credit life insurance involves a simpler enrollment process, because it depends solely on you being a borrower, whereas term life insurance takes your health and physical standing into consideration. The fees can be slightly higher, but the requirements for approval are lower, meaning that you’ll have little trouble securing insurance for your vehicle purchase. The two forms of insurance also differ when it comes to their coverage and duration. Insurance on your loan decreases in its value as time goes on because you’ll be making monthly payments on your car, and eventually it will expire when the purchase is complete.

Steps Toward Securing Insurance

The process of securing credit life insurance for your auto loan is as follows: First, the borrower buys insurance from the same institution making the loan, whether that be a finance company, the auto dealer, a bank, or another company. You can pay using either a single or monthly premium payment, with the monthly option getting joined in with your loan payments. Many insurance plans include the possibility of opting out before the loan is paid off, giving you some additional flexibility down the road. The benefit to this is that you’ll have some insurance when the majority of the loan—and the burden to your estate should something happen—remains unpaid, and then you can decide to stop paying for insurance once the balance feels more manageable.

Ultimately, each person has to weigh the risks against the cost of adding an insurance premium onto your monthly bill. But if the family is taking on risk and would be left in a troubling financial state in the event of the unexpected, buying credit life insurance for your auto loan can be a very smart and forward-thinking decision.