Credit Life Insurance
Modified on 2010/10/25 14:51 by swathen — Categorized as: Uncategorized
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Credit Life Insurance Definition
Credit life insurance policies are used by individuals to cover the oustanding debt on a loan. As the loan decreases so does the plan until they both reach maturity and the entire amount of the loan is due.
Credit Life Insurance Meaning
A Credit life insurance policy is usually put on loans like a mortgage. Credit life insurance is usually adopted so that a person's loved ones will not have to cover the cost of the mortgage or loan outstanding after that person's passing. The great thing for insurance companies is if the person lives to the maturity of the loan then the amount gained through insurance payments is straight profit without having to account for any liabilities.
Credit Life Insurance Example
George is 65 years of age and has just moved into a new house with a 15 year mortgage. George has had health problems in the past, and decides that he needs to invest in credit life insurance so that the mortgage burden will not be on his four kids. George ends up living throughout the entire loan and thus the insurance plan has reached its maturity and will not need to be exercised. It should be noted that if George had died during the time of the loan, the insurance company would be required to pay out whatever amount that George owed on his mortgage. In this situation George's debts would all be paid for without putting an unwanted burden on his kids.