A credit life insurance policy, or "credit life," is used to pay off a debt -- a loan for car, furniture, electronics, appliances, etc. -- if you die or are disabled. It is a type of decreasing term policy.

It is insurance on a debtor, in favor of a lender. Although they may have some similar features, it is not the same as mortgage life insurance.

You may be offered this sort of policy when you are financing a large item. The premiums are usually added into the loan contract. It is always optional, and it can be quite expensive. Note that it often illegal for a lender to require you to buy it.

In answer to the question "Is credit life a good buy?," InsureMe states:

If you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.

The answer on this page was edited based on source material from the Washington State Office of the Ins. Commissioner, the Ohio Department of Ins., and InsureMe. These pages are no longer being updated. --Webmaster

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