Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Nov 10, 2020

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Have you ever purchased a car or applied for a credit card and been offered disability credit insurance in the process? For a very nominal fee you can insure that the payments on the account will be paid by credit disability insurance if you should ever become disabled and lose your income. Sounds great! However, before you sign up for an additional amount added to your payment every month for credit disability insurance, make sure you are getting the best bang for your buck.

TIP: Credit disability insurance is commonly included in contracts to lease cars, mortgages, credit cards, and other large loans. Always ask for the details of credit disability insurance when you take out a line of credit.

The Purpose of Credit Disability

Credit disability can be included with any major purchase on credit such as a car loan, boat loan, credit cards, motorcycle purchase, mortgage, etc. Each month, a small fee will be added to your payment or in some cases if you agree, deducted from a checking or savings account to pay for the credit disability insurance. If you were to ever become disabled, the credit disability benefits would pay the monthly payment.

Understand the Terms of Credit Disability

If you are considering adding credit disability, make sure you understand the coverage and ask the right questions. The following are some question to ask before you agree to a credit disability policy:

  • How long is the maximum payment length of your policy? There are some credit disability policies that only pay for a limited term of 12-24 months. These are cheaper but it will only give you partial coverage in the case that you have a long term or permanent disability.
  • What is the waiting period before my credit disability payments start paying my loan? This will let you know how much you will need to save to cover the loan until your credit disability policy kicks in.
  • Does the credit disability policy just pay for disability or unemployment as well?
  • What is the definition of disability on the policy and what are the exclusions? Is pregnancy excluded? How about surgery? Does it only cover an accident or does it also cover an illness that prevents you from working?

Keep in mind that credit disability covers the monthly payment for the loan for which the credit disability insurance was taken out. It will not pay other loans you may have.

Credit Disability Insurance Claims

A year after taking out the loan, many consumers forget that credit disability protection has been included. Make sure you contact your credit disability provider right away once you have a disabling injury or illness so you can file a claim. The insurance company will request information on your injury and send medical forms for your physician to complete. If you find that your credit disability claim is denied for reasons you do not understand or that your insurance company is prolonging acceptance of your claim, you should contact a disability insurance attorney for assistance. Many states have established bad faith insurance laws that will punish an insurance company if it is denying your claim unfairly. A disability insurance lawyer can review your credit disability policy and determine if the insurance company has wrongly denied your credit disability claim. To locate a disability insurance lawyer in your area, click here and one will review your case for free.

Better Options for Credit Disability Insurance

If you are considering credit disability insurance protection, a better option may be an individual disability insurance policy. Including credit disability insurance in your individual policy will pay you a monthly disability benefit based on your income. With this monthly payment you can pay any household debt, your mortgage, car, credit card, etc. As you pay off your car or your credit cards, you will still have your individual disability insurance policy to provide protection for remaining household living expenses.

Credit disability insurance protection included in your individual policy gives you some important benefits:

  • You have the flexibility to use your benefit payments to pay any credit bills you owe
  • You maintain the policy for your entire working career
  • You only have to deal with one company for your credit disability insurance

TIP: If you elect to include credit disability insurance in your disability policy, make sure you purchase enough insurance to cover all of your monthly bills.

To get a free quote on an individual disability insurance policy that includes credit disability insurance, click here and take advantage of the Free Advice quote center today.