Function

• Credit insurance can be included in the loan's monthly payment or paid in a separate payment. The payment amount varies by the loan type and repayment terms. The insurance can have a separate contract or be included in the contract for the loan. In some cases, the consumer receives an information packet and can contact customer support regarding their credit insurance.
  
  

Benefits

• Credit insurance can protect consumers from missing payments and receiving negative marks on their credit reports. The credit insurance can cover a one-time payment during a tough financial period, or it can pay off a debt completely, such as in the case of death and dismemberment or permanent disability. Benefit payments under these circumstances depend on the contract for the credit insurance.
  
  

Time Frame

• Credit insurance can be for a set period of time or last for the life of the loan. In the case of credit insurance for a credit card, annual renewal might be required. In this case, customers can elect to drop the coverage from their monthly payments. In the case of a consumer loan from a bank, it is more likely that the consumer does not have an option to drop it once the contract is initiated.
  
  

Considerations

• Consider the different types of credit insurance and the costs associated with them. According to the U.S. Department of the Treasury, lenders must disclose the terms and costs of the insurance, specifically how the insurance will impact the terms of the loan. Consumers should also consider that, in the event of a claim, credit card insurance will probably only pay the minimum payment due each month.
  
  

Warning

• According to the Money Crashers website, the bank can gain more than the consumer in some credit insurance policies. The site recommends that consumers make sure that they are not paying interest on the credit insurance and to find out if there are any balance limits on the payments or payoff benefits.