What is Credit Life Insurance?Credit Life Insurance is a specialized type of life insurance policy intended to pay off specific outstanding debts in case the borrower dies before the debt is fully repaid. Hence financially protecting the lender from the unforeseen risk of death of a loanee.
Credit life policies feature a term that corresponds with the loan maturity and decreasing death benefits that correspond with the reduced debt outstanding over time. The face value of a Credit Life Insurance policy decreases proportionately with the outstanding loan amount as the loan is paid off over time, until both reach zero value.
In the event of death or permanent disability to the debtor rendering them unable to continue servicing the loan, any outstanding loan is paid out to the lender. The lender then avoids collecting debt through realisation of security.
Credit Life Insurance provides protection and financial security for both the bank customer and the bank itself.
- Entry age: 18-65
- Minimum term: 12 months
- Maximum term: as per the bank lending rule