Credit insurance and credit disability insurance are services provided by several insurance companies. For instance, union security life insurance Company which is a member of assurant group (Lamb, 360). The credit insurance clients underwriting is done through several investments programs. Moreover, the company has a corporate office in Irving, Texas where all the credit insurance certificates and other relevant forms are produced.
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Central states health & life co. of Omaha is another company which offers these services. It’s a mutually owned insurance company still with other responsibilities like specializing in debt protection market, offering comprehensive training and support about the different insurance policies, as well as offering excellent credit insurance. OSU federal is another provider of credit life and credit disability insurance among other products and services (Redja, 480). CUNA mutual insurance society has been a provider of credit life and credit disability insurance services since 1935.
Both credit life and credit disability insurance policies covers someone’s loan incase he dies without making full payments, or if one becomes disabled and can not work any more to earn some income. Credit life makes an effort to cover the remaining loan when one dies, and the credit disability covers the loan if one falls sick or can not work due to some disabilities (Jennings, 870). These two insurance policies protect both the insured and the lender of the loan. The insured is protected from loosing any amount of cash or furniture to repay the loan, and the lender is given some protection from loosing the loan which he rendered the insured. When one decides to purchase any of the two insurance policies the amount that one owes the lender is raised.
This is because the policy premium is combined with the amount borrowed, and the interest is charged on the total amount making these insurance policies expensive and unaffordable to most people (Edelman, 320). On the credit insurance features, the face amount of the loan reduces depending on the loans outstanding balance. When one is using credit cards or home equity lines of credit the amount paid as premiums goes down as the outstanding balance reduces.
The main features which anyone willing to buy credit life and credit disability should be aware of are; the insured has the right to be given his policy within a duration of 30 days after the purchase. Unless one works at least 30 hours per week then he is not eligible for credit disability insurance (Edelman, 362). Disability of less than 14 days might not be considered by some policies and may fail to receive the benefits. One may fail to receive the policy benefits if he had a pre-existing health problem diagnosed within six months before the application. Persons above the age of 65 may not receive the coverage.
The credit life insurance policy is made available for individual persons or group of people having a joint account. The persons willing to apply for this type of insurance service, these services are offered on home equity lines of credit, installment, as well as home equity loans (Jennings, 653). The credit disability insurance service is only available on installment and home equity loans. The credit life and credit disability insurance services are easily gotten by anyone who has made a decision to purchase. For the people who want to be enlightened more about these services there is a toll free telephone number which one can call to book for an appointment. This number is available in the company’s website.
For the people who are already aware of the crucial information about these services can register on line. Once an individual declares that he is interested through online, the M&T securities representatives make an effort to call that person so as to follow up. Through the telephone the person wishing to purchase the services is asked some questions and he completes the process (Jennings, 523). For the people who are aware of where the company is they visit for quick and convenient purchasing of the products. They are also available for the existing customers who may be in dire need to ask some questions. They also provide their services to the client’s premises, as well as making those who do not know about their products and services aware.
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These insurance products and services are made available in websites and other media channels to create awareness to the people in public. Any person willing to purchase credit insurance policy, should always go to the company with good reputation, where the certificate of insurance is offered serving as a proof of purchase, and has a full description of the coverage (Redja, 472). The companies which give out the certificates within 30 days after the application of the policies are always preferred by most people.
Its advisable for the person willing to purchase these policies, to purchase from the organization in which one obtains his loan, this will enable him to shop for insurance and loan at the same time. For someone willing to purchase the disability insurance policy, the person should always consider the length of time through which he will be receiving the benefits (Redja, 502). If he discovers that the plan is temporary, one should not opt for it. A long term service is always taken as the better option.
The percentage of income should also be a factor to be considered, he should not be much interested in the cheapest policy, because the cost should not be considered more than the benefits which one would receive later. The most preferred option of credit insurance policies is where 40 to 60 percent of someone’s income will be paid (Lamb, 354). The benefits are always not taxed and this brings upon little difference between the pay taken and the costs. These credit insurance policies have got a major disadvantage which is considered by so many people, hence they decide not to purchase.
The beneficiary of the credit insurance policy is the bank. When one is purchasing this policy, it’s the bank which is requesting him to be paying the premiums to cover itself. This applies because as one fall ill or has acquired some disabilities due to one reason or the other, the bank continues to receive the minimum amounts on the loan which one had borrowed (Redja, 286). During this time the insured account continues to accumulate the interests. Another disadvantage is that, it would be cheaper for the borrower if he can decide to go for term life insurance.
Incase one is dead; the bank may decide to collect for the insured full loan outstanding. The premiums of the credit insurance are paid each month, and it’s determined by several factors such as the loan borrowed and the age of the person who borrowed the loan (Lamb, 413). The most discouraging feature of the premiums paid is that, it can be twice the effective cost of borrowing the loan. Credit insurance has got an outstanding advantage that, it’s clearly guaranteed by the person issuing. Despite the insurability of a person, the person is at liberty of purchasing such insurance. In most cases, the person who might not be qualified for the life insurance might be fit for credit insurance.
Edelman, R. The truth about money, (3rd ed), ISBN0060566582, 9780060566586. Harper Business, 2004.
Jennings, M.M. Business: its legal, ethical, and global environment, (7th ed),ISBN0324204884, 9780324204889. Cengage Learning, 2005.
Lamb, C.J. and Leonard, R. Solve your money troubles, (11th ed), ISBN1413306314, 9781413306316. Nolo, 2007.
Redja, M. Principles of Risk Management and Insurance, ISBN8177581058, 9788177581058. Pearson Education, 2005.