About Credit Disability Insurance and How it Can Benefit You!

Also referred to as accident and health insurance, credit disability insurance is intended to cover a debt, or a part of a debt, in case the borrower becomes totally unable to work and earn money due to disability. It can be used by an individual who is disabled by illness or injury for at least a certain number of days (depending on the company) – meaning the individual does not have to be permanently disabled for this insurance policy to take effect.

Credit disability insurance versus credit life insurance

Credit life insurance pays off the entire loan balance when the insurance holder makes a claim, while credit disability insurance makes monthly payments to loans until the insurance holder/borrower recovers and is able to earn money again. Of course, in cases where the insured person is disabled for life and never resumes working, the insurance company will continue to make the monthly payments until the loans are completely paid off. In most cases, credit disability is more expensive than credit life insurance policies.

Who qualifies for this type of insurance?

The requirements usually vary based on the insurance company, but most of the time the following are the factors involved for eligibility:

• Some policies will not cover pre-existing conditions (health issues that have been diagnosed within the last 6 months before your application)
   
• Some policies will not provide coverage for those of, or nearing the retirement age of 65
   
• Some policies require applicants to be working at least 30 hours per week

When is this needed?

Credit disability insurance is usually required when applying for loans like car loans, mortgages, or revolving credit lines. People who have bad credit history are sometimes recommended to get this in order to get approved for certain types of loans. Some of the advantages of getting this type of insurance are:

• Knowing that if you get sick or injured, not able to work, and have no income, your loans will be taken care of
   
• It becomes a part of your loan structure, so there is no separate loan amount to pay

Points to Remember

• Depending on the insurance company and the policy you signed up for, receiving the benefits can be 14-90 days from the date you claimed for disability.
   
• Payments may become retroactive from the first day, but some policies don’t do this too.
   
• Always shop around from several companies and see what their credit disability insurance policy offers, some companies offer better deals than others.