What is credit disability insurance?

A type of insurance, also known as accident and health insurance, that makes payments on the loan if you become ill or injured and cannot work.

This is optional coverage. When purchased, the cost of the policy is often added to the principal amount of the loan. Lenders must disclose the terms and costs of obtaining the insurance since it can affect the terms of the loan. Some policies combine Credit Life and Credit Disability into one policy and may contain provisions for cancellation of the policy.