A credit life insurance contract is a decreasing term life insurance policy that will pay the off the loan for a borrower if the borrower passes away. Credit Life insurance is usually provided by the lender at a price they set, and the beneficiary is the lender.
Traditional Life insurance can be used to pay off a loan with the following advantages:
1) The death benefit does not decrease, so whatever does not go to the lender can be used for something else;
2) The borrower can shop around to get a more competitive price;
3) The policy is under the control of the policy owner, not under the control of the lender.
Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
Credit Life Insurance contracts are designed to protect the creditor and the borrower's family from incurring a loss due to the death of the borrower. A life insurance policy is taken out on the borrower for the amount of the loan or credit extended. The named beneficiary is the creditor who extends the loan / credit. Should the borrower die before the loan is paid off the creditor is paid by the insurance policy and therefore also protects the family of the borrower from incurring the debt. Typically these policies are "decreasing Term" policies, which decrease in value as the loan is paid down.
.JPG){kind=avatar}
Traditional Life insurance can be used to pay off a loan with the following advantages:
1) The death benefit does not decrease, so whatever does not go to the lender can be used for something else;
2) The borrower can shop around to get a more competitive price;
3) The policy is under the control of the policy owner, not under the control of the lender.