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Credit Life Insurance

Credit Life Insurance
Betsalel Cohen
UpdatedNov 13, 2023
Key Takeaways:
  • Credit life insurance is a form of term life insurance.
  • The pro of credit life insurance is if the borrower dies the loan is paid.
  • The cons to credit life insurance concern its value.

Is There an Age Limit For Credit Life Insurance on a Car Loan?

Is there a limit on the age that you cannot get credit life insurance on a car loan?

Thank you for your question about credit life insurance and car loans. We will help you understand what is credit life insurance and why lenders might require you to buy a policy for a car loan and other loans or debt.

What is credit life insurance?

Credit life insurance is a form of term life insurance. Credit life insurance can be purchased when getting a loan for a vehicle (such as a car or truck), mortgage, or unsecured debt, including credit card debt.

As the balance of the loan decreases, the amount of the credit life insurance decreases. If the borrower dies during the term, the lender is the beneficiary of the insurance contract.

Pros of credit life insurance

The major pro of credit life insurance is if the borrower dies, the loan is paid, and the estate of the deceased receives an asset free and clear. The item is therefore an asset, as opposed to an asset encumbered by a liability that may exceed the value of the asset. Additionally, the family of the deceased does not have to pay the loan back. Lastly, it provides them with financial security in case of an unexpected death.

Cons of Credit Life Insurance

The cons to credit life insurance concern its value. Life insurance tied to a loan can be a poor value. The borrower buying term insurance on the open market will almost always find greater coverage for the same cost, or the same coverage for less by comparison shopping term life policies. Life insurance is a poor value if the borrower has no dependents and does not wish to leave assets to his or her estate. Some credit life insurance policies do not pay if the borrower dies from a pre-existing condition.

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Does a lender require credit life insurance?

Generally, a lender may not require a borrower to buy credit life insurance as a condition for being approved for a loan. If the finance person writing the loan insists this is the case, check with the insurance commissioner in your state before agreeing to buy credit life insurance. In most states, you may cancel credit life insurance during the term of the contract.

The requirements for credit life insurance can vary depending on the type of loan, including whether it's a car loan or another secured loan. Here are some key points to consider:

  1. Type of Loan: For secured loans, such as car loans or mortgages, lenders may have different policies regarding credit life insurance. While they generally cannot require it as a condition for loan approval, they might strongly recommend it, especially if the loan amount is substantial.
  2. Lender's Policy: Each lender may have its own set of policies and recommendations. Some might be more insistent on credit life insurance for certain types of loans, like car loans, where the asset (the car) depreciates quickly.
  3. Risk Factors: Lenders consider the risk associated with the loan. For high-value or high-risk loans, they might suggest credit life insurance more strongly. This is because, in the event of the borrower's death, the insurance can cover the remaining debt, ensuring that the lender doesn't lose money and the borrower's estate or co-signers are not burdened with the debt.
  4. State Regulations: As mentioned, it's important to check with your state's insurance commissioner. State regulations can influence whether lenders can require or suggest credit life insurance for certain types of loans.
  5. Negotiation and Comparison: If a lender is pushing for credit life insurance on a car loan or any secured loan, it's wise to shop around and compare terms with other lenders.
  6. Age and Health Considerations: You asked about the age of the borrower. There is no universal rule concerning age limitations on credit life insurance contracts. Some policies end when the borrower reaches the age of 70. However, this is not a hard-and-fast rule. Review the credit life insurance policy terms and conditions carefully before signing the agreement. In particular, watch for limitations on pre-existing conditions and the maximum age covered.

See the Insurance page to learn more about auto, home, and health insurance.

I hope this information helps you Find. Learn & Save.




BBill minogue, Sep, 2023
Can anyone direct me to a auto/ camper dealer that offers Credit Life prefer SC 29576 but can travel?
BBill minogue, Sep, 2023
Hello, I'm looking for auto and campers RV sales that offer credit life as a option, 29576 SC
wwilliam Francis Minogue, Sep, 2023
Hello, I'm looking for auto dealers and camper sales that offer credit life I'm in SC 29576 thanks Bill
RRonda Woodard, Feb, 2021

How long do you have to have credit life insurance on a home before it will pay? Example: I buy a house in December, first payment is February and I died or became disabled in January will it pay.

JJosh, Aug, 2021

Hello Ronda. 

Thank you for reaching out. Please, do not take my answer to be legal advice as I am not an attorney. Only attorneys can offer legal advice. 

Typically, Credit Life insurance covers you if you died or became disabled. Essentially can no longer earn income. 

What is seems to be the problem? Please let us know so we may assist you the best we can. 

Regards, Josh 

PPeggy puckett, Sep, 2020

my husband had life coverage on a vechile loan which expired in June,  but he passed in Sept. Will they deny my claim?

DDaniel Cohen, Sep, 2020

Please accept my condolences for your loss, Peggy.

I can't give you any legal advice, as I am not a lawyer. I can share my opinion with you. Unfortunately, it is my opinion that once the policy expired, coverage no longer existed. This means that you have no legitimate claim to assert.

TTracy S., Apr, 2014
I have already asked this question, but I may have posted it in the wrong category. My in-laws purchased a vehicle in October 2013. My father-in-law is listed as the buyer and my mother-in-law as the co-buyer. They purchased credit life for the buyer. My FIL unexpectedly passed this month. Do you know if the credit life covers the vehicle with my MIL listed as Co-Buyer?
BBill, Apr, 2014
The answer to your question is found in the contract for the credit life insurance the co-borrower signed. We have not read the contract, so it would be inappropriate for us to offer an opinion either way.

What to do? File an accurate and complete claim. In other words, do not hide the fact the other borrower is alive. If the insurance benefit accrues when one borrower passes away, then it was worth your while to file a claim.