Top ways to save money on credit insurance

Credit insurance is a way to protect your credit should you become ill or lose your job. It may also be called “credit life” or “decline of health insurance.” Here are several ways to save money on credit insurance without compromising your safety:

1) Shop around

If you’ve recently bought a home or had other changes in financial status (such as inheritance), call different insurers (of any kind) and ask about lower rates. You might pay less upfront if you’re willing to spend hours on the phone, but the pay-off will be worth it. After all, “time is money.”

2) Know what you’re buying

Suppose you’ve already bought credit insurance but are questioning whether it’s really necessary to read your contract carefully. Be advised that credit insurance may not be included in any portion of your homeowner’s policy. Many people pay for the same kind of protection twice without realizing they could save hundreds by making one simple call to their insurer.

3) Shop around again

It doesn’t hurt to check up on existing policies either. If you have more than one loan or other debt payments, discuss adding another credit life/health rider to cover them with a single company. When shopping around for this extra coverage, keep in mind that healthy people typically pay lower premiums than those with medical conditions.

4) Minimize your coverage

Having the minimum amount of credit insurance you need will probably cost less than insuring your entire line of credit.

5) Avoid automatic renewal

You’ll be automatically renewed for this expensive policy at the beginning of each year if you don’t call to cancel it yourself. If you’re still unsure whether you want to continue, give it a try for six months and then decide again. If your circumstances haven’t changed, consider dropping the extra expense altogether.

6) Buy term insurance instead

Term insurance (pure life insurance) tends to be much cheaper than credit life/health coverage since it provides only temporary protection.

7) Buy disability insurance instead

Disability can be even more devastating than illness, in some cases affecting your ability to earn an income for the rest of your life. Even if you’re fortunate enough to receive sick pay or short-term disability through work, that may not suffice when it’s time to start paying off all those debts (especially if someone else depends on that income). You might consider buying individual long-term disability insurance rather than credit life/health coverage.

8) Try an alternative

Some companies will let you protect yourself by setting aside a certain amount of money in a separate savings account every month, with interest on that balance. ( This is often cheaper than credit insurance, but there are no guarantees if, for example, you lose your job.

Don’t forget to check your homeowner’s insurance policy for details about any credit insurance that may be included.