Monday, November 10, 2008

Credit Life Insurance: Buyer Beware

Buying that new car? Were you offered "credit life insurance" to pay off your loan if you die? Here's what often happens. In your zeal to drive off with your new ride, the salesman asks you about purchasing credit life insurance. He helps you fill out the application by asking: "You've never had cancer or a heart attack or anything major like that, have you?" You say no, so he checks "no" on all the boxes and you sign the application.

Only one problem. Below is language from a typical credit life application:

"1. I am not eligible for any insurance if I now have, or during the past 2 years have been seen, diagnosed or treated for:

(a) A condition, disease or disorder of the brain, heart, lung(s), liver, kidney(s), nervous system or circulatory system; or

(b) Tumor; Cancer; Uncontrolled High Blood Pressure; Diabetes; Alcoholism; Drug Abuse; Emotional or Mental Disorder; Acquired Immune Deficiency Syndrome (AIDS); the Aids Related Complex (ARC); or received test results showing evidence of antibodies of the AIDS virus (HIV Positive).

Read (a) carefully again. Look how broadly it is written. If you were treated for pneumonia or even bronchitis within the 2 year period, you were "treated for...a condition of the lung(s)," making you technically ineligible for the coverage!!!

But wait, you say-- the salesman only asked about major diesases, which your now departed spouse did not have. In fact, he died of something unrelated to a "condition of the lung(s)." No matter. Chances are, your claim for the life insurance will be denied, and now you're stuck with having to sue to prove you're entitled to the $8,000 loan balance on the car.

Therein lies the problem with this insurance. The policies are downright lousy and one sided and you never know it until you try to use it. Bottom line: your chances of actually qualifying for it are so low that it is a borderline ripoff, in my opinion. Even if the salesman was ethical and thorough in the application process, and you simply forgot about a prior medical treatment which was not disclosed on the application, the language of these policies is such that you will still be denied!

It's a rigged game, in my humble opinion. In the words of Nancy Reagan, "just say no!"

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