ANDY'S CONSUMER TIP OF THE DAY: 'Croak-and-choke' insurance

ANDY'S CONSUMER TIP OF THE DAY: 'Croak-and-choke' insurance

MEMPHIS, TN (WMC) - 'Croak-and-choke.' That got your attention, I bet!

Croak-and-choke insurance is slang for credit life or disability insurance. It's a policy some mortgage, auto loan and appliance financing companies try to sell you. It supposedly will pay off the loan balance in case you die or become disabled (croak or choke), so that the loan won't be a burden to you or to your loved ones.

Consumer advocate Clark Howard wrote in his book Get Clark Smart:  The Ultimate Guide for the Savvy Consumer that credit life/disability insurance is a waste of money. The money is paid directly to the lender, not to your loved ones. Howard said you're essentially paying for a policy that makes sure the lender gets paid.

"By buying it, you are paying to protect the lender," Howard wrote in his book. "People agree to buy credit life in the mistaken notion that they're protecting their loved ones from their debts. Let's say you have an outstanding mortgage balance of $50,000, and you're concerned that your family will lose the house if you die. The better thing to do is buy a term life insurance policy that pays your loved ones directly. Then they can decide how to use the money. It may be better for them to keep the mortgage in existence and use the insurance proceeds to pay for living expenses."

With croak-and-choke insurance, your family has no say in how the money's applied. It's also more expensive than the typical term life policy. Choke on that.

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