Credit Insurance: Is It Worth It? The Pros and Cons


If you’ve ever purchased anything from a car to an oven, you’ve probably been offered a choice of getting credit insurance. You might find yourself asking, what is this? Is it worth it? What can I get from this?

The salesperson might not have explained it thoroughly to you, you might have been in a hurry and refused without thinking about it. But now you are left wondering. Is it worth it? Do I really need it?


Credit insurance is a policy that covers the balance on your credit line in the event that you are unable to make your payments. It is beneficial for both the lender and the borrower. It protects the borrower’s loan. It also guarantees payment for the lenders. Generally, it is a win-win situation for all parties.

There are four types of credit insurance for consumers. Those are credit life, credit disability, involuntary unemployment and property. These types will fit most insurance needs consumers may want when they purchase something. For businesses, there is also trade credit insurance. Businesses have this to insure that their credit payments are covered.


  • It can help you avoid damage to your credit score by paying off your debts.
  • Ideal if you can’t be approved for life insurance.
  • Some policies have a death benefit. If you bought a car for $30,000 and had only paid off $20,000 at your death, the policy will pay off the balance. The policy also gives up to a total of $30,000 to your family.
  • It can be very useful in times of emergencies such as death, unemployment, property damage, or a sudden disability.
  • It brings you peace of mind that your family won’t be left without money when you suddenly die.



  • You have to pay a premium every month. The premium is a percentage of your balance. Premiums can be expensive and will incur interest.
  • You may find that you’re paying for a policy that you might not even use. You may even outlive the policy term and get no financial gain from the premiums you’ve paid.
  • Can be costly if you are considered a high risk person. If you have bad health or into extreme sports, you are considered high risk.
  • It can be too costly with little or limited coverage.
  •  Pricing of policies differ and are negotiable. You may find that you are paying more for the policy.


Deciding if it’s beneficial and worth paying for is entirely up to you. While it might bring benefits for you and your family, you might find the same benefits with a regular insurance policy.

What’s important is that you need to read the terms and conditions thoroughly. Ensure that you are actually qualified to make a claim. In some cases, it might just be an extra expense that you don’t really need. You don’t even need it if you don’t have a family or dependent!

Weigh the pros and cons and read all terms first before making any decision. Remember, this is not something that should be decided on the spur of the moment. Taking the time to consider everything is ideal.

Consumers nowadays are striving to become more informed on issues of finances. So it’s important to be able to understand what credit insurance really is and what it offers to come to an informed decision.