Attorney General Gansler Alerts Maryland Consumers:
Beware of High-Priced, Unnecessary Credit Insurance
MD ( June 20, 2011) - In the latest edition of The Consumer’s Edge, Attorney General Douglas F. Gansler warns consumers to beware of costly and unneeded insurance when borrowing money or making a purchase on credit. This insurance is called credit insurance, and is notorious for being one of the most overpriced insurance products. The Consumer’s Edge Edition 143 is available at http://www.oag.state.md.us/Consumer/143.pdf.
“Consumers need to know what they are buying and how much it will cost before they commit to paying for credit insurance,” said Attorney General Douglas F. Gansler. “Before you sign any contract, understand all the terms and costs.”
Credit insurance may be sold under the pretense of being mandatory, but rarely is. In Maryland, lenders cannot require the purchase of most types of credit insurance. Lenders can require credit property insurance on loans secured by a piece of property, or a destructible possession, but a consumer is allowed to choose the insurance company.
There are three types of credit insurance:
- Credit Life Insurance, which pays off an outstanding loan if a consumer dies;
- Credit Disability Insurance, which makes payments on a loan if a consumer is disabled; and
- Credit Involuntary Unemployment Benefit Insurance, which makes payments on a loan if a consumer is involuntarily unemployed.
If consumers wish to purchase insurance, they should consider a few alternatives, including checking to see if their current homeowner’s or life insurance policy provides adequate coverage.
As with other forms of insurance, it is important for the consumer to check the policy closely before agreeing to its terms. Some good questions to ask include the length of any waiting period, limitations, cancellation terms, coverage length, financing and comparability to other similar policies.
For more information on credit insurance, Maryland consumers are advised to contact the Maryland Insurance Administration at 410-468-2000 or 1-800-492-6116. Consumers may also go online and read MIA’s literature on credit insurance at www.mdinsurance.state.md.us.
To file a complaint against a business, please call the Consumer Protection Division at 410-528-8662 or 1-888-743-0023, or visit the website at www.oag.state.md.us/consumer.