Many personal debt agreements have a clause specifying that the full remaining balance will become due and payable upon the death of the debtor. This separate clause may be present whether or not there is any credit life insurance covering the loan agreement. Although lending institutions regularly offer credit life insurance at the time the loan is initially created, such coverage is not mandatory and is often refused by the borrower. When credit life insurance is in force, the remaining loan balance will be repaid to the lender by the credit life insurance company as long as a death claim is filed so that the insurer can extinguish the debt. However, there is always the possibility that credit life insurance benefits will not be collected if the survivors or the executor or administrator is not aware of the insurance. Credit insurance information, therefore, should always be noted in files pertaining to the insured�s debt.

Credit life insurance is not the only way of repaying debts that become due and payable at death. All types of life insurance policies provide death benefits that are suitable for repayment of debts. A single large policy can provide enough funds to extinguish many or all outstanding debts. Moreover, the standard types of individual life insurance policies may be lower in costs than credit life policies. There are some debts that do not become due and payable at the death of the borrower. This is more likely to be the case when both husband and wife are liable for the debt. Adequate amounts of individual life insurance will give the survivor the option of either paying off the debt or continuing to repay it according to schedule. That option is not available under credit life insurance because benefits automatically extinguish the debt once a claim has been filed.