How does loan insurance work?

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Adam McCann, Financial Writer

@adam_mccann • 07/20/21 This answer was first published on 07/20/21. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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Loan insurance is a policy that protects you if you are unable to make loan payments for a certain amount of time due to circumstances out of your control, like medical issues or unemployment. There are different types of loan insurance. One type will make loan payments for you up to a certain amount of money during your time of hardship. Another will pay off loans in the event of your death. And another will protect your collateral if you have a secured loan.

Loan insurance can provide some peace of mind and help you avoid credit score damage from late payments. But it's important to weigh the costs against the benefits, and read the fine print, before purchasing this insurance.

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