In my article I left out an important point. It has to do with how successful you will be if you have to make a claim.
A term life insurance policy that you own personally is medically underwritten up front. So, if you die and your family makes a claim, the life insurance proceeds are guaranteed to be paid out — and in a timely way.
But if you buy the lender’s life insurance, the in-depth underwriting begins at the time you make a claim. If there’s a medical condition found after the fact, the claim process can be delayed significantly. And you may not be able to claim at all, if there’s a pre-existing condition or cause of death.
Check out the warning by CBC Marketplace in its analysis of credit life insurance for cars. It says buyers may be paying premiums without being qualified to receive an insurance payout. To make sure insurance isn’t being sold to you if you don’t qualify medically, you should discuss pre-existing conditions with the insurance seller or the company that underwrites the policy.