Credit Life and Disability Insurance
- Credit Unions
- Auto Dealers
- Banks
- Finance Companies
- Mortgage Servicers
- Community
Our highly rated credit insurance programs enable your organization to increase market penetration and grow revenue while protecting you against delinquencies and charge-offs.
In the event of an unexpected death, disablement or inability to continue working, our credit life and disability insurance plans will absolve or reduce a borrower's remaining loans. The cost of the premium is included in the borrower's loan payments and should a claim be required, benefits are paid to your financial institution.
Insurance Types
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Credit life insurance: pays off or reduces the insured balance on a loan if the borrower dies
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Joint credit life insurance: protects both the borrower and a co-borrower if both are named on the loan application
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Credit disability insurance: makes the monthly loan payment (up to the contract limit) on a loan if the borrower becomes ill or disabled and is unable to work
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Joint credit disability insurance: protects both the borrower and a co-borrower if both are named on the loan application
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Q1: What is credit life and disability insurance, and how does it work?
Credit life insurance pays off or reduces a borrower's loan balance if they pass away during the loan term, while credit disability insurance makes the monthly loan payment (up to a contract limit) if the borrower becomes ill or disabled and cannot work. The premium is bundled into the borrower's loan payment, and if a claim is filed, benefits are paid directly to the financial institution—not to the borrower or their family 12.
Q2: How is credit life insurance different from traditional life insurance?
Traditional life insurance pays a death benefit to the policyholder's chosen beneficiaries, who can use the funds for any purpose. Credit life insurance pays the lender directly to settle a specific loan, and the coverage amount decreases as the loan balance is paid down. It may cost more for the same or less coverage and offers less flexibility in how the benefit is used 45.
Q3: Is credit life and disability insurance required, and can a borrower cancel it?
No—it is voluntary. Federal law prohibits lenders from deceptively including credit insurance in a loan without the borrower's knowledge or permission 6. Borrowers can typically cancel the coverage, and the insurance ends when the loan is paid off, refinanced, or transferred 1.
Q4: Who is eligible for credit life and disability insurance?
Eligibility requirements vary by provider, but borrowers generally need to be the primary borrower on the loan and between 18 and 65 years old at the time of enrollment 1. Joint coverage is also available for co-borrowers when both are named on the loan application 2.
Q5: How does offering credit life and disability insurance benefit a financial institution?
These programs help institutions grow non-interest revenue through increased product penetration while protecting the loan portfolio from delinquencies and charge-offs caused by borrower death or disability. They also provide borrowers with peace of mind, strengthening the lender-customer relationship and differentiating the institution from competitors
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