Do you have a line of credit account? If so, have you thought about what would happen if you couldn’t work and were unable to pay off your balance?
That’s where a line of credit insurance policy may help.
There are so many bills to pay in life, and insurance premiums are just one of them. But while certain types of insurance are required — such as auto and home insurance — others are optional and are available to provide additional coverage.
Line of credit insurance is a unique and lesser-known type of insurance. Let’s take a closer look at this insurance product to help you determine if it’s worth paying for.
What Is Line Of Credit Insurance?
Line of credit insurance is an insurance product that covers you in the event that you’re unable to continue paying the outstanding balance on a credit product, like a line of credit.
Also known as credit line insurance, this type of insurance can pay off any balance you still carry if you find yourself unable to pay it on your own if you ever become seriously ill or injured. The policy will also kick in if you pass away so your loved ones are not stuck paying your bills.
The premium you pay will depend on your age and the outset sign balance on your line of credit. Your policy would cover this balance in the event of an illness, injury, or death, up to a specified amount.
Types Of Line Of Credit Insurance Offered
Line of credit insurance can be broken down into a handful of products, including the following:
- Life insurance. In the event of your death, your life insurance policy can pay up a specific amount of your insured credit lines.
- Disability insurance. If you suffer an ailment that leaves you unable to work, your policy will pay you a monthly benefit for a temporary amount of time.
- Critical illness insurance. If you are diagnosed with a serious illness that prevents you from working, this policy will kick in to pay off the outstanding balance of your line of credit up to a certain amount as specified in your policy.
- Job loss protection. If you suddenly find yourself without an income after being laid off from work, your policy will pay a monthly benefit up to a specified amount as per your insurance policy for a temporary period of time.
The exact details of the payments made will depend on your particular insurance policy.
Cost Of Line Of Credit Insurance
Like any other type of insurance, the line of credit insurance requires that you pay premiums to keep the policy in effect. The cost of your insurance premiums depends on several factors, including the following:
- Daily balance. Your policy’s premiums are calculated based on the daily balance of your credit line up to a specific approved amount.
- Type of coverage. The more coverage you choose, the more expensive your policy will be.
- People on the policy. The number of people on your policy, as well as their age, sex, health status, and whether or not they smoke will impact the cost of your premiums. As your age increases, so does the cost of insurance.
You may be able to qualify for discounts as offered by your insurance company. For instance, insurers typically offer premium reductions for policyholders who have more than one insurance product with the same provider. Inquire with your insurer about multiple policy product discounts.
Eligibility Requirements For Line Of Credit Insurance
In order to qualify for a line of credit insurance policy, you’ll need to meet specific criteria, including the following:
- Line of credit amount. Your insurance provider will require that you hold a minimum amount in your line of credit account. For example, Desjardins requires that you have at least $10,000 in your credit line.
- Age. Depending on the exact type of line of credit insurance policy, you may qualify if you’re under a certain age. Using Desjardins again as an example, you must be 69 or under for life insurance coverage, or 64 or under for disability insurance coverage with life insurance coverage.
- Canadian resident. You must live in Canada as a citizen or permanent resident.
- Be the borrower or the guarantor. Your name will need to be on the line of credit as the borrower or the guarantor of the borrower on the account.
Line Of Credit Insurance FAQs
Who claims the line of credit insurance?
What happens if I miss my line of credit insurance premium?
What kind of documents do I need to make a line of credit insurance claim?
Can I cancel my line of credit insurance?
Final Thoughts
If you’ve got a line of credit and typically carry a large balance on it, it might be worth considering taking out a line of credit insurance policy. But before you do, assess any other insurance product you have, such as life insurance, that may offer enough protection to cover any outstanding balances on bills, including your line of credit.
