Lenders can hesitate to loan money to someone with little or no credit history regarding financing. If you’re someone who hasn’t built up your credit, you might wonder how to get the financing you need. Luckily, there’s a type of insurance designed specifically for situations like this: credit insurance.
Want to learn more about this type of coverage and what it can do for you? Stick with me till the end of this post if you don’t want to miss out on this vital information.
What is credit insurance?
Credit insurance can protect your assets from unexpected debt for every small business owner. In particular, credit insurance can help with employee theft and unpaid debts. If an employee steals from you or a customer didn’t pay their invoice quickly, having protection could help mitigate your losses.
Additionally, if a policyholder has significant debts and becomes disabled or dies, that coverage might pay off those debts for them. This is known as a death benefit. The idea is that these benefits will help ensure that someone’s family isn’t left paying off large debts after death.
However, note that many people have had difficulties getting credit insurance companies to pay out claims in recent years. Therefore, it may be best to consider other options when deciding how to protect yourself against potential financial loss. For example, you could look into using a guarantor instead of credit insurance.
A guarantor is basically someone who agrees to cover any outstanding debts if something happens to you. That way, even if you die or are disabled, your loved ones won’t be stuck with high medical bills. It’s important to note that different types of insurance policies are available.
You should always do research before purchasing any kind of insurance product. With this, you can know exactly what you’re buying and whether or not it makes sense for your situation.
Why would you need it?
Whenever you’re just starting, it can be hard to get your business on solid financial footing. This makes financing a big concern—especially when you factor in unexpected challenges, like lawsuits or theft. Unfortunately, if you default on payments with suppliers or creditors, you could wind up sinking your company.
Therefore, credit insurance is a great way to ensure that doesn’t happen. In fact, these policies have been around for decades because they deliver some serious benefits.
Furthermore, credit insurance gives you peace of mind by protecting your assets and income from unforeseen events. It also protects against loss caused by illness, injury, death, and unemployment. Plus, there are no age restrictions or pre-existing conditions.
If you’ve had trouble getting approvals for other coverage, there’s a high chance that you can still qualify for credit insurance. The best part is that you don’t need to wait until something bad happens to start enjoying its benefits. Since most plans cover existing debt and new purchases, you can start reaping their rewards immediately.
After all, nothing says peace of mind like knowing that you’ll always be able to pay your bills. Depending on your plans, premiums can range from as little as $1 per month to several hundred dollars each year.
Since many companies offer discounts based on where you live and how long you’ve been with them. Therefore, it’s important to do research before committing to one provider.
How can you get it?
There are two different types of credit insurance that you can purchase. The first, third-party credit insurance, is purchased through an independent party and is usually inexpensive, ranging from $20 to $50 yearly. This type of coverage covers you in case you cannot pay your bills because of death or disability.
The second option is employer-provided coverage. Whenever your company offers it, you should take advantage as it tends to be cheaper than buying it yourself. It also covers more situations such as unpaid medical bills or divorce.
“How much does it cost?” Premiums for credit insurance range from $15 to $100 per month. This depends on how much coverage you want and how old you are when purchasing a policy. However, you’ll pay more if you’re older than 25 because your chances of dying or becoming disabled increase.
Moreover, if you purchase a policy before you turn 35, there will be no additional charges based on your age. The average premium is $30 per month for most policies that cover between $50,000 and $75,000 in debt. Policies that offer higher limits will have higher premiums. It’s also important to note that premiums vary by company, so make sure you make more findings before choosing one.
“How do I get started?” it’s easy to purchase credit insurance. You can buy it directly from an insurance company or a financial institution such as a bank or credit union. You must fill out an application whenever you choose to go with a third-party provider. After that, provide proof of your income and assets, among other things.
Is it worth it?
“Does credit insurance sound like a good idea?” as with many things, there’s no absolute yes or no. It depends on your risk tolerance and budget—not to mention your particular circumstances. However, if you have a high risk tolerance and a sizable credit line.
Credit insurance might not be right for you if you’re looking for ways to cut costs. It’s important to understand what credit insurance is and how it works before deciding whether it makes sense. Don’t forget that while it can be helpful in certain situations, credit insurance isn’t a magic bullet.
Don’t get caught up thinking it will solve all your problems; use it as a tool in your arsenal. The best approach is to keep your finances healthy without it and only turn to credit insurance when necessary. After all, it’s difficult to stop once you start paying for coverage. You can now take full advantage of its benefits while avoiding unnecessary expenditures.
You have seen the different reasons why you should get credit insurance. As long as you feel it’s right for you, you’ll gain so much from it.