by mega » Thu Jan 24, 2008 12:27 am
Hi Everyone,
I just joined today and am getting the feel of my way around here. I was an automobile salesman for 20 years and wanted to share a thought on the Credit Life Policy that you are usually offered at some point during the purchase process.
I know most of us want to make sure that our loved ones are not left with huge mortgage amount on our homes and auto's so we often times purchase credit life insurance on all our major purchases. But in the case of automobiles you may want to consider purchasing a term policy instead. What many people do not realize about credit life ( at least on auto purchases) is that you purchase the policy based on the financed amount of the vehicle. However, as you pay off the finance amount you lose that amount from the payout of your credit life if something was to happen to you.
Example
You finance 20,000 dollar and die with $18,500 left on the finance. Credit Life would pay that amount.
However, let's say nothing happens until you have only 3 payment left for a total of say $900. The Credit Life would only pay that amount.
Whereas if you had purchased a term life policy equal to the amount of premium that you would pay in credit life over the term of the loan you would most likely have purchased at least a $25K policy that would pay 25K until the last payment was made.
Now I am not suggesting that Credit Life is not good for some. I just wanted to suggest that you might want to think about a term policy instead when purchasing an auto.
I just joined today and am getting the feel of my way around here. I was an automobile salesman for 20 years and wanted to share a thought on the Credit Life Policy that you are usually offered at some point during the purchase process.
I know most of us want to make sure that our loved ones are not left with huge mortgage amount on our homes and auto's so we often times purchase credit life insurance on all our major purchases. But in the case of automobiles you may want to consider purchasing a term policy instead. What many people do not realize about credit life ( at least on auto purchases) is that you purchase the policy based on the financed amount of the vehicle. However, as you pay off the finance amount you lose that amount from the payout of your credit life if something was to happen to you.
Example
You finance 20,000 dollar and die with $18,500 left on the finance. Credit Life would pay that amount.
However, let's say nothing happens until you have only 3 payment left for a total of say $900. The Credit Life would only pay that amount.
Whereas if you had purchased a term life policy equal to the amount of premium that you would pay in credit life over the term of the loan you would most likely have purchased at least a $25K policy that would pay 25K until the last payment was made.
Now I am not suggesting that Credit Life is not good for some. I just wanted to suggest that you might want to think about a term policy instead when purchasing an auto.
Posted: Thu Jan 24, 2008 04:58 am Post Subject: Welcome to the forums
Hi mega,
Welcome to the forums. Its good to know that you even have something to share about life insurance. I'm sure you'd drop in from time to time & help the community members.
Regards,
Sasha
Posted: Thu Jan 24, 2008 05:05 am Post Subject: pls explain a bit more
However, let's say nothing happens until you have only 3 payment left for a total of say $900. The Credit Life would only pay that amount.
Do you mean that in case I pass away with $900 left to pay, then credit life would only pay me for the rest $(20,000-900)=$11,000 ?
Please explain it to me.
Regards,
Tomhopkins66
Posted: Thu Jan 24, 2008 05:08 am Post Subject: what about the premium?
Hey.. don't you feel for the term policy that you're talking about, the premiums won't remain that uniform throughout!
I feel the premiums for credit life won't increase that abruptly..am I right!
Vegasmale
Posted: Thu Jan 24, 2008 09:42 am Post Subject: Preminum on Credit Life "VS" Term
Hi Tomhopkins66,
Thanks for the response on this thread. To answer your question :
Do you mean that in case I pass away with $900 left to pay, then credit life would only pay me for the rest $(20,000-900)=$11,000 ?
Actually the Credit Life that you purchased based on $20,000 purchased would only pay the $900 that you had remaining on the payment. It will only pay off the remaing balance. Where as the term policy would pay the amount.
Posted: Thu Jan 24, 2008 09:50 am Post Subject: Term Rate Increase
Hi Vegasmale,
The average new car automobile is financed for 5 years, while the average for a used one is 48 months. I don't think you would see much of a premium change in a policy that was already written in that time period but if you did then you could always lower the term amount to match what you were willing to pay and still be way ahead on the total dollar amount of insurance benefit.
Posted: Thu Jan 24, 2008 10:33 am Post Subject: Thanks for the welcome Sasha !
It is always nice to be welcomed to a new forum. I have been reading many of the post since I have joined and am very impressed with the knowledge of those posting here. I expect I will be learning much more than I am able to share but will try to jump in when I feel I can add something of value.
Again, thank you for that welcome.
Posted: Thu Jan 24, 2008 10:35 am Post Subject:
Personally and I think most economists and ins. experts agree that credit life is always a bad idea (better than nothing of course, but as it stands against term)...Typcially the premiums are high when you consider it's 'devalueing' as the balance lowers....A term policy (which I believe it's premiums CANNOT change) is a much better choice.....
Posted: Sun Jan 27, 2008 08:28 am Post Subject:
Hello everyone, Credit Life is the same as Decreasing Term Life.
With a home mortgage, auto loan, credit card, or personal loan, only the amount outstanding (the balance of the loan) is covered. The premiums, however, do not change - ever.
If you took out a $250,000 home loan and covered it with this type of policy, the premiums would be, let's say $110.00 each month. 15 years later, you would only owe $125,000 on your mortgage and your premiums would still be $110.00. 29 years into the loan, your balance would be $1,014 and your premium, to cover that amount, would still be $110.00
Generally, this type of coverage is a bad idea. Good call Lori.
Posted: Thu Sep 29, 2011 05:29 pm Post Subject: zWelCWUlUabbZDok
Zz2R8b Gripping! I would like to listen to the experts` views on the subject!!...
Posted: Thu Sep 29, 2011 09:50 pm Post Subject:
I would like to listen to the experts` views on the subject!!...
You obviously read mine and Lori's posts, how many more "experts" did you want to hear from?
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