Most dealers will offer credit protection if you’re taking out a loan to buy your next vehicle. Here’s some information on common insurances to help you determine if you’d like to add one to your next loan.
Life Insurance
Life insurance is a protection that pays all or part of the loan if the purchaser(s) die before it’s paid. Having life insurance would leave the buyer’s family with an asset instead of a liability in the event the buyer were to pass away.
It is an excellent choice to ad on if you don’t have any existing coverage or if you have not updated your existing policy to cover your new debt.
If you’ve already got life insurance, and you’ve confirmed you have enough to cover the additional debt, this coverage may not be for you.
Sickness and Injury/Disability Insurance
Disability insurance covers the payment on your loan if you get sick or injured and have to be off work.
If you’re working full time, your employer may offer coverage already. However, it is important to check how much they’re covering and after how long (i.e.: they may only cover 67% of your regular income after a waiting period of 60 days, which would still leave a gap in coverage).
Not having enough coverage can lead to missed payments, which can impact your credit. Poor credit will decrease your buying power on future purchases.
This is an excellent protection to add on if you don’t have any existing coverage, or if you just need to increase your existing coverage to account for the new debt.
If you’re not working, are retired, or have sufficient coverage already, you can skip this one.
Critical Illness Insurance
Critical Illness insurance pays all or part of the loan should the purchaser(s) be diagnosed with a terminal illness and survive longer than 30 days. Only certain illnesses are considered and may vary from policy to policy. Typically, they will include:
- Life-threatening Cancer
- Heart attack
- Coronary Artery Bypass Surgery
- Stroke
- Major organ failure requiring transplant
- Paralysis
This coverage has strict limitations on pre-existing conditions. Be sure to check with the dealer to see if you qualify.
This insurance is great to add on if your family has a history of critical illness, and you don’t have coverage elsewhere.
Must-ask questions when you’re thinking of buying:
- Does the insurance expire once you reach a certain age?
- Does the insurance cover the entire loan, or does it expire early?
- What qualifies as a pre-existing condition? Are there time limits? (i.e.: if you had a condition 10 years ago but have been treatment-free for 5 years, do you qualify?)
- Joint vs single coverage: If there are two purchasers on the loan, is coverage for both or just one?
- Is there a waiting period for the insurance to kick in?
If you’re still unsure whether credit insurance is right for you, feel free to give us a call!
