They also know their best market-- the insurance ingenue, a relative newcomer to questions of family security. Says Ray LuBien, senior vice president of Security Pacific Insurance Services in San Diego, "It's going to appeal most to someone who doesn't have a lot of other basic coverage"--most commonly, life insurance.
It might not appeal to that customer either if he considers the alternatives, rarely mentioned by lenders. Credit insurance is tied to specific loans, paying off that obligation alone. The money even goes directly to the creditor: "It doesn't even give your heirs the right to decide what to do with the money," says Hunter, "though they might prefer to keep a $50,000 loan at 8% and do something else with the insurance money."
What's more, covering each insurance need separately, says Hunter, is "like buying toothpaste in individual portions squeezed from the tube. You should figure out your family's total needs--not just paying off loans, but food, clothes, housing for X number of years, and buy insurance in aggregate amounts." Indeed, since life insurance gets cheaper, the higher its limits, "you might buy more efficiently if you're covering more," says Huff.
But nothing's sure: the basic rate isn't the only consideration. Nothing's simple either: if it's hard to evaluate such specialized credit insurance all by itself, it's even harder to compare it methodically to other, more general coverages--the subject of the next column.