Insurance Pitfalls
February 26th, 2008 | by admin |There are some pitfalls to the policies. For one, the proceeds of the insurance policy go first to the lender to pay off your loan, which eats into your financial flexibility, said Douglas Lamb, manager of disability and flexible benefits for Agency Services Inc. of Memphis. Also, the expense of such a policy grows if the lender adds the premium for the policy for the full term to the balance of your loan and applies the loan interest rate or finance charges to it. For example, you buy a single life, level policy amount on a four-year, $ 10,000 car loan. Premiums would total $ 488 over the term of the loan. If the interest rate on the loan is 10 percent, the finance charge on the premiums could add $ 48.80 per year to the loan - about $ 4 per month.