What Is Debt Protection Insurance?
- Financial Education
- Frontwave Credit Union
If you’ve recently purchased a car, secured a personal loan or opened a home equity line of credit, you may have been offered something called debt protection or payment protection insurance. If you’ve never heard of it before, you may have wondered, “How do I know if I need debt protection insurance?” We’re here to set the record straight on exactly what it is and why you might need it.
Debt Protection 101
Ever been in a situation where you were unable to pay your monthly bills due to illness or unemployment? That’s exactly what debt protection insurance is meant to help with. It’s a loan insurance policy that can suspend or cancel your loan payments if you’re unable to make them for a covered reason – all without harming your credit.
What’s a “covered reason”? It depends on the exact policy you buy. At Frontwave Credit Union, we offer a variety of policies to choose from. Some offer coverage in limited situations, for example, if you were to unexpectedly pass away. In the event of your death, a Frontwave Credit Union debt protection policy could suspend your loan payments for up to 6 months or cancel the balance of your loan to allow your family time to get back on their feet financially.*
Other policies offer additional protections that may suspend or cancel loan payments if you become disabled or unemployed, are hospitalized and/or separate from military service.
Who Needs Debt Protection?
First you should know that debt protection is optional. It doesn’t affect your ability to get approved for a loan, even though it may be offered at the same time you’re seeking a loan approval.
That said, you might consider debt protection if you’re living paycheck-to-paycheck or have very little saved up to cover you if you can’t work due to a serious illness or job layoff. In that case, a debt protection policy can help preserve your credit while you get back on your feet. You may also want to consider debt protection if your family relies on your income to pay bills. In that case, a policy with a death benefit could ease the financial strain on your family.
On the other hand, if you already have an emergency fund, as well as disability and life insurance, debt protection may not be as big a must-have for you.
Still have questions?
Feel free to give us a buzz at 800.736.4500 to learn more our Frontwave Credit Union Debt Protection program.
*Eligibility requirements, conditions and exclusions apply. Contact us at 800.736.4500 to learn more.