Credit life insurance is usually marketed on a direct mail basis by credit card issuers and mortgage lenders. The credit card issuers and mortgage lenders usually contract with an insurer to actually underwrite and issue coverage and do not usually act as the insurer. At a growing rate, the credit card issuers and mortgage lenders have established or acquired affiliates or subsidiaries through which they issue such coverage.
Credit life policies typically provide for payment of the outstanding credit card or mortgage balance in the event of the death of the insured. The premiums for credit life coverage vary with the amount of the covered outstanding indebtedness.
Credit life insurance is almost always a bad deal for the consumer. With credit life insurance the only person or entity that is going to receive any payment is the credit card issuer or mortgage lender. Instead, buy term life insurance that will provide your beneficiaries not only with funds to satisfy your outstanding debts, but also additional funds for their needs.
Disability insurance, also known as disability income insurance, is a form of health insurance that provides coverage to replace a portion of the insured's income if he or she becomes temporarily or permanently disabled as the result of sickness, accident, or injury. Disability coverage can have a lot of variables. First, most disability policies have a waiting period (often referred to as an elimination period) after the disability commences before the insured can start collecting benefits. Common waiting periods are thirty, sixty, ninety, and 180 days. The longer the elimination period, the lower the premiums are.
Disability policies also vary in the period for which benefits are payable. These periods can range from as short as two years, to as long as until the insured reaches the age of 65, the usual age at which most persons retire. The longer the period of benefits coverage, the larger the premiums. Disability policies also vary in the amount of benefits payable, usually expressed as a percent of the insured's predisability income. Generally, disability policies will limit benefits to no more than 60% of the insured's income. This limit is intended to account for the insured's loss of net income, not gross income.
This is done because disability benefits are usually not taxable, and someone who is no longer receiving payment of wages is no longer paying Social Security and Medicare taxes. Further, disability policies often contain provisions requiring coordination of the benefits payable with other recoveries the insured may be receiving, such as Social Security disability payments, so that the insured is not receiving greater net income by way of disability benefits than he or she did before the disability occurred. These provisions are all intended to avoid providing an incentive for malingering.
Disability policies can also vary in their definitions of disability. There are usually separate definitions of partial disability and total disability. The definitions also vary in whether disability is defined in terms of the insured's disability to perform the duties of his or her occupation immediately prior to commencement of disability or the insured's disability to perform the duties of any gainful employment in an occupation that would provide income commensurate with that earned prior to disability.
Individual disability income policies are available and tend to be quite expensive. Much of the disability income coverage sold in the United States is provided through employer-sponsored or other group plans. For many persons, participation in such a group disability income plan, if available, may be the only realistically affordable way to obtain any such coverage. Even then, premiums can be fairly substantial, especially in light of the fact that many persons also need to contribute to health insurance premiums and pay for life, homeowners, and auto insurance.
Choosing a longer elimination period such as ninety or 180 days, can help lower premiums to the point where they are affordable. If you choose such a ninety or 180 day elimination period, you need to have enough savings to cover your income loss during that period, once your paid sick leave (if any) has been used up.
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1. Contractual liability and owned property exclusions apply to liability coverage
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