Credit Life Insurance Trap

Beware: Credit life insurance is a poor deal in most states, even though the prices are capped in every state. Banks and other lenders push it because it is lucrative for them—not for borrowers. Make sure you do your homework and check out every policy before agreeing to it.

Trap: When purchased with big-ticket items—a new car, for example—it can cost several times the price of primary term life insurance. This is because they bank on you not checking out the terms, price, and coverage.

Exception: Rates do not vary by age, so older buyers—especially those over age 50—may find it reasonably priced. Also: Younger individuals who smoke or have health problems may find it helpful, too.

See Also: Life Settlement Buyers

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Laura Bushnell is Editor in Chief for NLRBFCU and based in Boston. Previously, she held senior VP level positions in corporate finance and consumer financial planning firms.

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