Claims may be denied for certain reasons, such as for a preexisting condition. Credit disability insurance plans that contain preexisting exclusions are usually defined as “6 by 6” plans. This means if you file a claim within the first 6 months of the credit transaction for a health condition that you were treated for during the 6 months prior to obtaining the credit, your claim can be denied due to the “preexisting condition” clause. Additionally, in a typical credit disability plan, the definition of total disability changes after the borrower is disabled for one year. During the first 12 consecutive months of disability, disability is defined as the inability to perform the duties of the regular occupation at the time the disability occurred. After the disability has lasted for 12 consecutive months, disability is defined as the inability to perform
occupation for which the borrower is reasonably fitted by education, training, or experience.
Credit disability insurance may not last for the entire duration of the loan. Credit disability insurance is generally written for 60 months, and any payments due after the insurance termination would not be covered. Credit insurance also may not cover balloon payments that are due at the end of a loan.