CREDIT INSURANCE 5- POINT FACT CHECK

Credit insurance has its critics, everything does. Here is what they say. Here is what we say.

They say it's expensive.

We say, the cost for credit life insurance on a typical, average insured consumer loan of $6,000 is $30 a year. That's inexpensive. In fact it's less than the policy fee on most term life insurance policies.

They say consumers are forced to purchase credit insurance when they borrow and that the insurance is packed into the loan.

We say consumers have a choice. First, it's the law that credit insurance is offered as a choice consumers make for themselves. Second it's good business to give consumers what they want, but only when they want it.

They say credit insurance benefits to consumers should be measured by loss ratios.

We say consumers do not buy loss ratios, they buy benefits and credit insurance pays significant benefits as promised when they are needed. Credit life and disability insurance annually pay over $2 billion in benefits to consumers.

They say something they call reverse competition increases the cost of credit insurance through agent commissions.

We say credit insurance rates are regulated in every state. The amount insurers pay agents must be paid from within the regulated rate. The fact is the average sales commission on a typical, average credit insurance premium is $9 per year. Moreover, the commission doesn't increase the state approved rate that a consumer pays.

They say credit life insurance should apply only to the amount borrowed.

We say it makes sense to provide coverage for the total amount that has to be repaid, including principal and interest, because the additional benefit can be applied to delinquent loan payments that often precede the death of the borrower or can be used to pay other estate expenses.