Is Loan Insurance Worth The Money?
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Banks and credit card companies will often try to sell you loan insurance. But is this protection really worth the cost?
The purpose of this insurance is usually to pay off the balance of the loan if you pass away before it is paid off. Sometimes this insurance will also cover your minimum payments if you become unemployed.
As I have mentioned in some of my other articles, the main purpose of insurance is risk management. But it is possible to be over insured or to spend to much money on insurance. Quite often, there are lower cost options available to you.
Loan Insurance For Your Life
Life insurance on loans is usually a bad idea. In most cases, the cost per thousand dollars of coverage is very high! The insurance offered by credit card companies is often the most expensive life insurance you can buy.
Having life insurance on this debt is a good idea if your family will face hardship should you pass away before the debt is paid off. However, your best bet is to skip the offer from your creditor and go shop around for a short term life insurance policy. It's easy to do online with websites like Hometown Quotes in the USA or Kanetix in Canada. These sites will automatically get several quotes for you to compare.
Loan Insurance For Unemployment
If you do not have an emergency fund of 3 to 6 months of pay put away for a rainy day, then having loan insurance to cover your payments if you lose your job might be a good idea. Especially if you are not confident in the security of your job or business income. If this is the case, having job loss insurance on your debt will help protect your credit rating in the event that you lose your job and are unable to make payments toward your debt.
I invite you to read more about insurance by checking out some of the related articles listed below.
