Should credit insurance premiums be part of the finance charge?

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Should credit insurance premiums be part of the finance charge?
by Richard Insley, BOL Guru
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Question: We have a program to offer rate reduction to all customers who purchase credit insurance product with their loan. Should the insurance premium be part of the finance charge?

Answer: If the interest rate reduction is conditioned upon purchase of credit insurance, then the credit insurance is not voluntary. Premiums for credit life, disability and similar coverage are Finance Charges when the coverage is required.

First published on BankersOnline.com 11/4/02

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