Credit insurance can often feel like an upsell that sneaks up on you right at the time you’re ready to sign an auto loan. “What is it?” and “Do I really need it?” are the two most common questions, so we’ll answer both for you right here.
Credit Insurance, aka Credit Protection
Credit insurance is sometimes referred to as credit protection, and it basically covers the lender in case you find yourself unable to pay for your loan. It comes with an extra charge in the form of premium payments, and it covers you for different occurrences based on the type of credit insurance you purchase.
If You Lose Your Job – Car payments become a lot harder to make when you lose your job. If you’ve ever applied for a used car loan, you know that your employment was the crux that allowed the whole thing to happen. If you lose your job, even for a month or two, you can get behind on your payments and end up defaulting on the loan. Insuring against this makes it so the lender still gets paid, and you can still drive your car.
If You Get Hurt – In the future, you might get hurt either on the job or off the job. If you do injure yourself and are unable to continue on with the job you have, making your car payment could get tough.
If You Die – Of course, you’ll have a really tough time making your car payment if you die! In this case, you would be insured for the value of your used car and the lender would get a payoff amount. It could be one less thing for your family members to have to worry about during such a difficult time.
Different Types of Credit Insurance
There are four basic types of credit insurance offered based on the different things that can happen to you and your car over the life of the loan.
Credit Property Insurance – This type of credit insurance protects against property damage to your car. If your car is damaged and the value of the car decreases, you might find yourself upside down in your car loan without credit property insurance.
Credit Involuntary Unemployment Insurance – To get credit involuntary unemployment insurance, you have to either get fired or laid off from your job. If you voluntarily quit your job, you won’t be able to collect on the insurance you have.
Credit Disability Insurance – If you become disabled, credit disability insurance will cover you. Be sure to check with the agent to make sure that it covers you regardless of whether you get hurt on the job or off.
Credit Life Insurance – This is just like regular life insurance, but rather than paying a beneficiary after you die, they will pay the lender. Your car will be paid off, and it won’t become a burden to anyone.
Credit insurance pretty much has you covered for all the different possibilities, so it’s just a matter of deciding which ones you want to add on, if any at all.
Do You Need It?
As with any insurance, whether or not you need it is really dependent upon you and your current and future situation. Some people prefer having the insurance so that they don’t have to worry about their car payment if something happens to them. Other people just view it as an extra and unnecessary cost.
Peace of Mind – Having the insurance in place does provide peace of mind. You’ll know that whatever life throws at you, your car payment won’t be affected by it.
Extra Cost – You’ll want to consider the extra cost that credit insurance entails. But, don’t just write it off as unnecessary simply because it comes with a price. The nominal increase to your monthly payment may be worth the hundreds or thousands of dollars that you’d be insured for later on. Run the numbers to make a decision that’s right for you.
Go with a Trusted Dealership
We’d love to tell you about all the ins and outs of credit insurance and whether or not you need it for your particular situation. At Ride Time, we will always level with you! We’ll never try to push anything on you that you don’t need. Stop in today, and ask us as many questions as you’d like!