What are debt cancellation or debt suspension products offered with an auto loan?
Some auto dealers as well as banks and credit unions offer “debt cancellation” and “debt suspension” products or insurance under various names. These products are similar to credit insurance in terms of their function, but fees and other features may be 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. You have to meet the qualifications and avoid the exclusions.
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 decide you need these products or insurance, there may be cheaper ways for you to obtain coverage. For example, life insurance may be less expensive and allow your family or estate to pay off more than just the amount of your auto loan. If you have a complaint or a concern about this product, you can contact your state insurance department or commissioner.