The loan can be through the company selling the goods or an outside financial institution such as a bank. When you apply for this type of loan, the lender may want you to buy an insurance policy that protects the lender s investment. There may be good reasons for buying or not buying a policy for example, you might decide not to buy if you already have enough life insurance but the choice is yours. Insurance that covers such a loan is known as credit life and credit disability .
Some policies cover only life, some cover only disabilities, and others cover both.
Credit disability is often called credit accident and health insurance. If you die before the loan is fully repaid, the policy pays the lender an amount equal to what you still owe at that time Younger people usually can buy decreasing term life insurance for much less than a credit life policy costs. The decreasing term policy will meet the lender s requirement for protection on the loan. As you get older, the cost of buying regular life insurance rises. But in most cases, it is very expensive to buy a small credit life policy as a substitute for regular life insurance protection.