Back to Blog

What is Loan Payment Protection?

House Protected from Dominos

When you’re injured and can’t work, paying the bills can be a trick. Missing payments can ruin your credit and maybe even result in the loss of your car or your house. You can prepare for the worst by getting loan payment protection like credit life and credit disability insurance.First, a couple of facts:

  • Over 37 million Americans are classified as disabled and more than 50% are in their working years from 18-64. (U.S. Census Bureau, American Community Survey, 2011)
  • 68% of adult Americans have NO savings earmarked for emergencies. (U.S Federal Reserve Board, Survey of Consumer Finances, 2010)

Credit life and credit disability insurance are two types of loan payment protection. Credit life pays off your loan should you pass away. Credit disability makes your loan payments if you become sick or injured, and will continue to make your payments until you return to work or are declared medically unable to return to work (up to the policy maximum). The fees for these insurances may be included in your monthly loan payment and are spread out over the term of your loan.

I’m sure you’ve wondered: Should I spend the extra money for this protection? Don’t I already have enough life insurance and/or short term disability from work?

While we hope you and/or your family never need to use payment protection, here are some questions to consider.

 

Won’t my Workers’ Compensation (or employee disability insurance) cover my expenses?

Disability plans usually cover a portion of your income (66%) and are designed to cover your basic living expenses; however, it probably won’t be enough to cover all your loans and living expenses.

 

Man Looking at Solar Panels

Save Money AND Help the Environment

Get good rates and help fund clean energy loans with a VGreen Money Market account.

Learn More

 

Do I have plenty of life insurance to cover this loan?

While it’s wonderful that you have life insurance, have you thought of everything your family will need once you are gone? Most families have two incomes and if one income is stopped, what impact will that have on your family? With payment protection, your loan is paid off in full and that’s one less item that will need to be paid out of your life insurance policy.

 

I’m very heathy; I’m not going to need insurance, am I?

You’re healthy today but you can’t predict the future. Have you ever thought about what you would do if you couldn’t work? No one ever thinks they’re going to get ill or hurt on the job. Have you saved 6 to 9 months of living expenses in the event of an illness? If not, credit life insurance will help cover expenses if you are out of work for a while.

I had a member who was hurt on the job and unable to work for several years. He called me after the accident and thanked me for suggesting credit disability for his vehicle and credit card accounts. He had disability payments coming in from the government, but the payments covered some of his living expenses but not all the extras. He was so relieved to know that he didn’t need to worry about his vehicle or credit card. His spouse did not work, so it was a lifesaver for them to know they wouldn’t lose their car or their credit rating.

 

Are life or disability insurance worth the expense?

Most financial institutions offer a payment plan for credit life and credit disability Insurance that will work with your budget. You may be able to have your payment built right into your monthly loan payment so that it is affordable with your budget.

 

Next time you get a loan, remember to add credit life and credit disability Insurance to your loan. It will protect you, your family, your credit score, and your financial institution.

Credit

Worried about Your Credit?

This eBook can help you improve your score.

Download the eBook
Reading on Phone

Stay informed

Stay up to date on financial tips, tricks, and tools that will build your financial literacy and help you live a more prosperous life.

Subscribe now!