My dealer offered me debt cancellation insurance. What is it?
Some banks and credit unions sell “debt cancellation” and “debt suspension insurance” under various names. These programs are similar to credit insurance in terms of their function, but fees and other features may be significantly different.
In general, debt cancellation promises to eliminate the debt if you die or cancels the monthly payment if you become disabled, unemployed, or suffer some other specified hardship, if you meet the qualifications and there are no exclusions that apply to you.
Debt suspension is different. It temporarily postpones all or part of your monthly payment while you are facing a specified hardship – you are still expected to make the suspended payments in the future.
If you decided you need insurance, there may be cheaper ways for you to obtain coverage. For example, life insurance may be less expensive and allow you to pay off more than just the amount of your car loan.