CREDIT INSURANCE

The most important thing you need to know about credit insurance is that to be an allowable additional charge, IT IS VOLUNTARY. You have to give written indication that you desire the insurance.

 

TYPES OF CREDIT INSURANCE

 

Credit Life Insurance. . . .

 

Credit life insurance pays the gross or net amount of the credit transaction owed at the time of death. There are three types of credit life insurance:

 

uSingle life insurance covers the life of a single debtor in the transaction. If single life insurance is taken out on a transaction that both spouses signed, either the husband or the wife is the insured.

 

Joint life insurance covers the life of two debtors, usually the husband and wife.

 

Single and joint life insurance are reducing term insurance. This means the amount of insurance decreases as the balance of the credit transaction is reduced.

 

Level term life insurance is placed on single-pay credit transactions. The amount of the insurance does not decrease.

 

Credit Accident and Health Insurance. . . .

also known as Credit Disability Insurance

 

Credit accident and health or disability insurance make payments on the credit transaction when the insured is unable to work due to a disability such as an accident or a health problem.

 

The insurance takes effect after 7, 14, or 30 days of disability, then is payable from that date or is retroactive to the date of the accident or illness. The number of days and whether the period is retroactive or not depends upon the policy.

 

Unemployment Insurance. . . .

 

Unemployment insurance makes payment on the credit transaction in the event the insured becomes unemployed. Ask specific questions about unemployment insurance since policies may offer different benefits.

 

WHAT IF THE CREDITOR REQUIRES CREDIT INSURANCE?

 

A creditor can require credit insurance on a loan; however, if it is required, it is no longer an allowable additional charge and the premium/s must be included in the finance charge and reflected in the annual percentage rate disclosed.

 

If a creditor states you must have credit insurance in order to get the loan, do not sign that you desire the insurance and make sure that it is not disclosed as an additional charge in the itemization of the amount finance. If it is and they want you to sign that you desire the insurance, they should be told that practice is a violation of federal Regulation Z and the Indiana Uniform Consumer Credit Code, contact our department.

 

PROPERTY INSURANCE

 

If the loan is secured by personal property, the creditor can require that the property be insured. You must be able to select your own insurance. If the creditor has insurance available, they must give you the cost of the premium and the term of the insurance.

 

If you get your own insurance, you must be sure the insurance shows a loss payee to the creditor and that the creditor gets a copy of the original insurance policy and a copy of renewals of the policy.

 

If the creditor does not receive proof that the property is insured, they can secure insurance and add it to your account along with finance charges on the premium. The cost of the insurance placed by creditors is usually more expensive then insurance that you could secure.

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