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The insurance of credit is
an insurance policy of insurance related to a loan or at a
specific credit limit which pays some or all behind all the
moneys due so certain things arrive to the borrower, such
as death, the incapacity, or unemployment.
The costs (called a "premium")
for this are usually re-examined monthly charged, according
to which had balance, and according to the use of the loan
or the line, could the almost double cost of him (on the intelligent
use of opposite spectrum could avoid must pay the premium
of the whole almost).
The sale of credit insurance
is controversial because it is almost always cheaper for an
individual to forgo credit insurance, and instead have a term
life insurance or disability insurance policy to cover the
credit balance. The reason is that credit insurance is guaranteed
issue, no matter if a person would otherwise be insurable
or not. So the rates offered must reflect this, and be worse
than if a healthy or other wise insurable person were to purchse
coverage on their own.
In addition, there is an even
more controversial practice (called single premium credit
insurance), usually associated with the sub prime lending
industry, of charging the premium only one time at the beginning
of the loan. For example, charging 5,000 dollars at the time
of a mortgage refinance, which is usually financed (added
to the total loan amount) as part of the loan. This is considered
very bad by critics, since doing this is only cheaper if one
is sure that one is going to stay with the loan forever and
not refinance. Critics contend most people do not realize
this and lose money by refinancing once again, thereby losing
the benefits of the credit insurance.
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