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Consumer
Advisories
Credit
Insurance: Is it a Good Idea for You?
You may
be faced with an unexpected question when filling out loan
papers to finance the purchase of a car or to get needed cash
-- Do you want credit insurance?
Credit life, accident or health insurance provides that your
debt will be paid if you die, or are injured or disabled and
can't work. Credit unemployment insurance provides coverage
under some circumstances when you lose your job. These types
of insurance may also be offered by credit card providers.
While
credit insurance may give peace of mind, it can be very expensive
and may be unnecessary. It is also important to remember that
these types of credit insurance are optional.
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these tips when deciding whether to buy credit insurance:
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Consider
alternatives! Buying separate disability insurance or adding
a rider to your life insurance policy to cover payment of
the outstanding debt may be less costly than buying credit
insurance. Also, check to see if your homeowner's or life
insurance policy already provides adequate coverage.
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Consider
the total cost of credit insurance! Policies that cost only
"pennies per day" can add up to hundreds of dollars
over the term of a loan.
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Beware
of restrictions and limitations! For example, insurance
on a credit card may pay only your monthly miminum payment,
while interest continues to build.
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Read
the fine print before you buy! Don't sign or initial a statement
saying you want to buy credit insurance unless you decide
you really want it. Some consumers complain they didn't
know they had purchased credit insurance, even though loan
papers they signed stated they agreed to buy it. You may
determine some form of credit insurance would be beneficial
to you. If you realize after you've signed a loan contract
that you purchased credit insurance you don't want, contact
the lender. Iowa law requires that you be given a copy of
the policy or certificate, and gives you a chance to cancel.
To
file a complaint or to get further information about credit
insurance, contact the Consumer Protection Division by calling
515-281-5926, or writing to the Consumer Protection Division,
Hoover Building, 1300 E. Walnut, Des Moines, IA 50319.
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