Syndicated Financial Columnist, Host of the weekly talk show Steve Savant's Money, the Name of the Game, Scottsdale Arizona
Video Transcript: What is credit life insurance? There's some different definitions on this out on the web that you can see, but credit life insurance, some banks will say, "I want to indemnify a loan." If I'm going to take a loan out from a bank, they want to be indemnified in case something happens to you so they may ask for life insurance on your life, somewhat what they call credit life. It's very similar to mortgage insurance. If something happens to you, they want to indemnify the mortgage, or pay it off, in case one of the people that have obligated themselves to the mortgage dies.
Credit life insurance can also be used in business scenarios where business take out loans, and those loans need to be protected. The bank, or the institution that's loaning, wants to protect themselves and indemnify themselves so in case one of the people that are on the loan die, they're going to have their insurance pay off their debt to the bank or the institution that they're borrowing from.
Credit life insurance is a policy that will pay the lender if you should die before your loan is paid off. The face amount of the policy decreases as your unpaid loan decreases. Credit insurance is often sold by the same lender that gives you the loan. You can often get a better rate by shopping for a regular term life insurance policy. The face amount stays level and the part that does not need to go to the lender can go toward other needs.
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Credit life insurance can also be used in business scenarios where business take out loans, and those loans need to be protected. The bank, or the institution that's loaning, wants to protect themselves and indemnify themselves so in case one of the people that are on the loan die, they're going to have their insurance pay off their debt to the bank or the institution that they're borrowing from.