Credit life insurance is a form of decreasing term life insurance. That means that it only covers a set period of time. The length of an auto loan in this case. The decreasing part refers to the fact that the payout amount matches whatever the loan balance is at any point during the loan. The premiums do not decrease, just the payout. The premiums will be rolled into your monthly payment as well, so you will be paying interest on the insurance.
This type of insurance has two distinct pros to look at: Peace of mind since the insurance will pay off the loan and your estate won’t be responsible for the remaining balance. One convenient payment because the insurance premium becomes part of your car payment.
On the other hand, this type of insurance has a whole slew of cons: Credit life insurance is usually disproportionately expensive. The convenient single payment means that you pay interest on the policy every month. Let’s say you are single and have no children, no one is responsible for the loan after your death anyway. Unless you are elderly or ill, you most like will live throughout the life of the loan.
Buying credit life insurance is your choice, but, if you are needing a loan, it could be an expense to skip. Defaulting on a second chance loan may prevent you from getting a third chance. Weigh your age, health, and life factors carefully before signing one of these policies.