Debt Cancellation Insurance

Purchasing debt cancellation insurance can provide an added sense of security for many consumers. No one knows the future. Life can be filled with unexpected struggles that can turn a family's financial situation upside down. There are many debt solutions available that can address these financial struggles in a positive way. When a policy holder finds themselves without a source of income due to unemployment or disability, these policies will kick in, making monthly payments and covering up to eighty percent of an individual's financial liability. With most of these policies, there are limits as to the amount of debt that will be paid off. But for many consumers, the ability to make ends meet even when a source of income has either permanently or temporarily dried up is worth the cost of the service. Should an insured individual pass away, payment on indebtedness will continue after death until the agreed upon cap has been reached. Of course, there are limitations. Some policies will not pay if the insured is unemployed for reasons other than health related disabilities. Still other debt cancellation providers have created options that are geared toward paying off large amounts of indebtedness for clients.

Similar to plans offered by credit card companies that are geared toward insuring charge account debts, debt cancellation insurance offers protection to debtors and creditors alike. Many credit unions offer members an opportunity to take advantage of group policies that provide benefits to all insured parties within the group. With debt cancellation insurance, an individual can purchase protection that is geared specifically for them. They can chose from a number of coverage options rather than accepting only the terms that are offered to an entire group. For example if an insured client wishes to opt for a higher level of coverage, this is an option that can be chosen. A number of situations can impede a debtor's ability to make good on the promise to pay off debts. Unexpected illnesses or disabilities, along with involuntary unemployment, are just a few scenarios that can make meeting monthly expenses difficult. The death of a family breadwinner is another unfortunate scenario. These policies are geared toward addressing the needs of clients who fall victim to such unfortunate circumstances. Some products in this category will even pay off the indebtedness in full rather than providing a percentage of the monthly payment. This feature can be especially valuable for debts that stretch out over a number of years.

The way that debt cancellation insurance works can actually be very easy to understand. Most of these plans consist of three basic parts; the agreement, the contractual liability policy, and the administrative services contract. The agreement consists of a description of how the debts in question will be handled. Will the debts be suspended, cancelled, paid off or modified in some way? When and how will these debts be addressed? The answers to these questions are all covered in the debt cancellation insurance agreement. A contractual liability policy is basically a contract that exists between the insurer and what ever organization, such as a bank or a credit union, is offering the coverage. An administrative services contract lays out the nature of any administrative services that are offered. Items such as fiscal management services, processing services, fee processing and other clerical concerns are outlined here. Other administrative fees could include expenses incurred when handling claims processing. Agents who specialize in this type of insurance product can set down with a potential client and fully explain all of these areas of the agreement. If a policy seems overly complicated or is loaded with a number of hidden fees, a potential client should most likely look elsewhere for coverage.

There are also products that are offered by many credit unions that are not technically considered debt cancellation insurance, yet these products function in much the same way. Such products are instead considered loans or parts of an original loan agreement. In this way, providers of these products are not subject to the same rules that govern insurance products. However, basic truth in lending regulations will apply here. In this way, these products are similar to credit insurance. Many credit card offers will include some kind of option for canceling debts. Of course, these options will come with a price and the wise cardholder will investigate any fees that are associated with these options before agreeing to participate. Paying attention to such details is always important before signing any kind of credit or lending agreement or agreeing to any kind of debt cancellation insurance. The Bible describes the importance of faith over works. "Knowing that a man is not justified by the works of the law, but by the faith of Jesus Christ, even we have believed in Jesus Christ, that we might be justified by the faith of Christ, and not by the works of the law: for by the works of the law shall no flesh be justified." (Galatians 2:16)

Truth in lending laws require that any fees that are associated with debt cancellation insurance be fully disclosed to the client. These fees are generally to be regarded as finance charges. Limitations in coverage must also be fully explained. Any disclosures of information of this nature must be made before the client signs any contracts. In addition, all such disclosures must be presented in writing and cannot be done verbally. These features may be voluntary, and the client may have the right to waive them. If they are voluntary, they cannot be represented as an involuntary feature of any credit agreement.

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