Consumer Car Buying Advice Blog

Credit life and disability insurance is unlike other dealer back end products in the sense that consumers applying for auto loans for bad credit need to decide for themselves if they need it or not.

Not where you want to be

There’s a good chance that you may be one of a growing number of car shoppers who find themselves in the position of having to finance their next vehicle with a bad credit auto loan. As the focus of our business at www.autocreditexpress.com, we have helped thousands of applicants raise their credit scores and reestablish their car credit by filling out our online loan application for car loans with bad credit and financing a vehicle with a bad credit auto loan through one of our affiliate dealers. By paying off the loan in a timely manner while paying the rest of their bills on time, these buyers have a good chance of beginning a new chapter in their lives.

The alternative, buying a vehicle from a tote the note car dealer, can be a problem because these dealers don’t report payments to any of the credit bureaus.

In addition to the credit application, the web site also features a resource section where you’ll find calculators, videos and other information that will help you understand the car loans with bad credit buying process. This information is there for a reason: a bad decision at this time could result in a loan you can’t afford. If the result is repossession, your credit scores would drop even further.

The process can also be confusing, because in addition to the loan itself, the special finance manager who helped to arrange the loan is bound to offer you a number of “back end” products that you may never have heard of.

Today we’ll be examining two of those products: credit life insurance and credit disability insurance.

Credit life insurance explained

Credit life insurance is a form of term life insurance. The phrase “term insurance” refers to an insurance policy that is in force for a fixed period of time and cannot be renewed. Unlike a whole life policy, term insurance is also a form of life insurance that builds no cash value.

In addition to being a form of term insurance, credit life insurance is also considered to be a “decreasing” term policy. This means that payout on the policy is designed to match the loan balance throughout the loan term. As the loan is paid off, the loan balance decreases and the amount of life insurance covering the loan also decreases to match the amount owed on the loan contract.

Credit disability insurance

Also known as accident and health insurance, credit disability insurance is an insurance product that is designed to provide funds for your car payments if you should become disabled to a point where you are unable to work.

Credit disability insurance usually takes effect once you are disabled by a sickness or injury. Depending on the type of policy, the waiting period for benefits begins anywhere from 14 days to up to 90 days from the date your disability begins. Once it is determined that you have satisfied the waiting period, the benefit begins paying your car payment. In most cases, the benefit is retroactive to the first day of disability, although this is not always the case. It should also be noted that you do not need to be permanently disabled in order to receive benefits from these policies.

How policies are purchased

If you decide to buy either credit life insurance or credit disability insurance (or both), you usually have to do it at the time you take out your car loan agreement. The monthly premiums for either or both are based upon the original loan balance and their cost is added to the finance contract and becomes part of your monthly car payment. Because both are part of the finance contract and not paid in a lump sum, you are paying interest on the insurance premium(s) as well as on the vehicle loan, itself.

Are they worth the price?

That is a decision that is entirely up to you. Here are a few of the facts:

Advantages:

1.    Peace of mind – one will pay off your car if you should die before the loan contract is paid off, while the other will make your car payments for you if you become either temporarily or permanently disabled
2.    A single payment – the insurance payment becomes part of your monthly car payment, so there is no separate insurance premium to pay.
3.   If the loan is covered by credit life insurance, your estate won’t be encumbered with the loan balance or loan payments if you die before the car is paid off. Likewise, if you have credit disability insurance, you don’t have to worry about making your car payments if you become disabled and are unable to work.

Disadvantages:

1.    Generally speaking, these insurance products are more costly than if you were to take out a separate term life insurance or disability insurance policy for the loan amount.
2.    In addition to paying for the insurance premiums, you are also paying the interest expense on the balance of the policy costs every month.
3.    In the case of credit life insurance, if there is no co-signer on the loan and you are single; if the loan isn’t paid off before you die your family would have no liability.

The Bottom Line

The decision to carry credit life insurance and/or credit disability insurance on your loan contract is one that you will have to make. If you have a family and are worried that they might not be able to make payments on your car if you die, you might want to first look at the costs of a term life policy before you sign on the dotted line making credit life insurance a part of your car loan.

At the same time, if a disability would seriously hinder your ability to keep your car, you might want to weigh the pros and cons of a disability policy tied to your car loan versus paying for a separate disability insurance policy.

At Auto Credit Express we have helped thousands of people with bad credit buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. Unlike other sites, our toll free number is listed on every page in case you have any additional questions.

So why not begin the process right now by filling out our secure online bad credit car loan application to see what we can do for you.

Tags: Bad Credit, car credit, credit, credit bureau, credit disability insurance, credit life insurance, credit score, credit scores, disability insurance, insurance, life insurance

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