Life Insurance-Best Life Insurance

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Credit life insurance comes in three varieties...level, decreasing, and

revolving. Level life insurance begins and ends with the same coverage

over the term and is normally associated with single payment

obligations. It is illegal in most states to sell level life insurance on

installment transactions. Decreasing credit life comes in two sub-

varieties...gross and net. Gross decreasing credit life begins with the

"total of payments" (the principal plus all interest you will probably

have to pay over the whole term of debt) and decreases by one

monthly payment each month until it reaches zero at the end of the

term. Net decreasing credit life starts at the "amount financed" and

declines as the principal balance declines over the term.

Usually net decreasing life is enough to pay the obligation because it

tracks the remaining principal, unless you fail to keep up with the

payment schedule and reduce the debt accordingly. Gross decreasing

life will normally be excessive at the beginning and less so as the term

continues. For example, if the principal is $10,000 and there will be

$4000 in finance charges on a car note over a six-year term, the

insurance will start at $14,000, but during the first month the debtor in

fact only owes $10,000 plus a few days interest. This means that if the

debtor dies during the term the excess coverage should be paid either

to the debtor's estate or to a named beneficiary. In some states

creditors are limited to net decreasing life plus three or four months of

payments just in case the account is in arrears at the time of death.

Auto accident deaths create a unique insurance situation where credit

life is involved because the casualty insurance on the vehicle will often

pay off the car note leaving the credit life insurance to be paid directly

to the debtor's estate as a cash benefit. Millions of dollars of insurance

benefits have been lost because the surviving spouse was unaware of

the double coverage on the note. life-insurance.global

"Revolving account" credit life insurance usually involves a monthly

premium computed on the basis of the outstanding balance being

billed. The premium covers that amount for 30 days, discharging the

obligation if death occurs before the next billing date. Unfortunately,

national banks that issue credit cards have developed a scam to get

around the accusation of illegally high credit life premiums. Most of

them if pressed would take the position that since they are a

"national" bank the states cannot limit their insurance premiums, even

if the state also limits premiums charged by state banks, but this legal

position stands on shaky ground.

Many have issued their own policies in the form of "debt cancellation

clauses" which are amendments to credit card agreements under

which the account balance will be canceled if the debtor dies. But

because of the risk that some state may clamp down on their rate-

setting practices they "bundle" the credit life with up to a dozen other

coverages, nearly all of which are not rate-regulated, so the charges

produce a very large margin of profit. what is life insurance

They won't sell credit life alone, but require an "all or none" purchase

of the various components such as credit accident and sickness,

involuntary unemployment coverage, unpaid family leave coverage

and even such weird products as "college graduation", "having a baby",

"retirement", "divorce" and other "life events", each of which results in

a month or two of benefits at the minimum payment level on the

account. These bundled products usually cost upward of $1.00 per

$100 per month, or twelve per cent per annum on top of the existing

finance charge rate. Truth in Lending does not require that additional

12% to be reflected in the annual percentage rate, however, because

the coverage is deemed "voluntary" and not part of the "finance

charge".

Summary:

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