Here is a summary of the cons for buying credit life insurance. Keep this in mind the next time you visit a bank for a loan.
- Credit life insurance costs more than regular life insurance for the same type of coverage.
- The lender is the beneficiary, not your family.
- Credit life insurance is not required for taking out a loan, and if a salesman tries to imply that it is, go somewhere else or report him or her to the authorities.
The Federal Trade Commission has issued a consumer alert about credit insurance, including credit life insurance, credit disability insurance, and other variations of insurance that protect the lender that includes the following warning:
Before you sign any loan papers, ask the lender whether the loan includes any charges for voluntary credit insurance. If you don't want credit insurance, tell the lender. If the lender still pressures you to buy insurance, find another lender. And review your loan papers carefully to be sure they have been drawn up correctly. Lenders can't deny you credit if you don't buy optional credit insurance - and if you don't buy it directly from them. If a lender tells you that you'll only get the loan if you buy the optional credit insurance, report the lender to your state attorney general, your state insurance commissioner or the FTC. Consumers should ask these same questions about other extra products offered with their loan, such as auto or shopping clubs, home or auto security plans, and debt cancellation products.