Credit life insurance is coverage designed to pay off a specific loan or credit obligation if the borrower dies before it is repaid. The creditor is typically the beneficiary, and the death benefit often declines over time in line with the outstanding balance. Premiums may be paid as a single lump sum financed into the loan or as periodic charges. While credit life can protect surviving family members from debt burdens, it may be more expensive or less flexible than individually owned term insurance, and regulators scrutinize sales practices to prevent coercive or unsuitable add-on sales at the point of borrowing.

Advisors occasionally encounter credit life insurance when reviewing clientsTM loan documents or existing coverages on auto, mortgage, or personal loans. They compare its cost and benefits with traditional term policies that protect a broader set of needs. Banks and finance companies offering credit life must comply with disclosure and opt-in requirements, clearly stating that purchase is optional and separate from loan approval. Understanding credit life insurance enables advisors to identify redundancies, suggest more efficient coverage where appropriate, and educate clients on the pros and cons of lender-offered protection.