Understanding Credit Life and Accidental Death / Disability Insurance

Everyone hears the news and knows healthcare in America is a hot topic with politicians. It's no secret we need better insurance, more regulations on prescription drugs and reasonable healthcare costs. Regardless of your stand on this issue, health insurance is a valuable commodity to help avoid financial disaster due to illness or disease but there is another way to alleviate this situation. I'm sure you've seen the AFLAC commercials advertising money to help pay bills if you're laid up. What that crazy little duck is talking about is Disability Income Protection Insurance.

Based on your salary and the amount of coverage you elect, DI coverage will allow monetary relief payable to you in the instance you are disabled either short or long term and is coverage you maintain even if you purchase the policy through your employer. Therefore, if you leave your job due to illness or disease or are receiving Workers Compensation due to an injury on the job, you can still receive your DI benefits.

Most major insurance companies (State Farm, Allstate, etc) offer this type of coverage, so whether or not you like the AFLAC duck or your employer does not participate in a plan, you can still get a disability income protection policy.

Credit Life insurance is normally connected to a specific loan (ie; auto or home). Nearly every loan out there offers credit life and/or disability insurance that will kick in and pay your note in the instance of disability or will pay off the note in the occurrence of death.

Advantage: Although your note will increase by the amount of premium, you don't have to worry about this particular bill in the instance of death or disability.

Disadvantage: As the principle of the loan decreases, so does the face amount of the policy without a change in premium.

In most cases, it is wiser to purchase a Term Life policy to cover the face amount and length of loan - especially on a long-term loan such as a mortgage. This way, if your mortgage starts out at $100,000 for 20yrs and your policy is a 20yr level term for $100,000 as the principle of your mortgage goes down-your policy remains the same, leaving everything extra to your beneficiary.

For short term loans (auto, signature, etc) adding this protection can mean the difference between maintaining your good credit and filing bankruptcy. Even credit cards offer some type of credit life and/or disability protection.

Accidental Death and Dismemberment insurance is the type of insurance often connected to a checking and/or savings account and pays a death benefit only in the instance of accidental means. It is usually pretty cheap and provides a little extra coverage for pennies. However, this is not the type of insurance to rely on to protect your family's income in the instance of your death.

If all these types of insurance (life, health, disability, auto, home, flood, etc) serve only to confuse or frustrate you, visit your local insurance professional. He or she can explain everything and guide you in purchasing adequate protection for your family.

Remember the bible talks about "getting your house in order" and insurance protection is one way to do this.