How the cost is worked out
A single premium added to the loan is borrowed too, so you pay interest on it at the note rate divided by 12. The cost is the extra monthly payment × the number of payments.
Worked example
Adding a $600 premium to a $15,000 loan at 11% over 4 years raises the payment to $403.19, $15.51 more each month. The insurance costs $744.35 in total, $144.35 of it interest on the premium.
Your rights
Under Regulation Z (12 CFR 1026.4), credit insurance premiums count in the finance charge unless the lender tells you in writing that the insurance isn't required, discloses the premium in writing, and you sign or initial a request for it. When it's optional, you can say no.
What this calculator assumes
The premium is financed for the full term with no refund. If you repay early, you may get part of the premium back. Lenders can't finance credit insurance premiums on mortgages or other loans secured by your home (12 CFR 1026.36(i)).
Borrowing in the UK?
The country choices above the inputs open separate local pages. In the UK, payment protection premiums are paid monthly or yearly, and single-premium cover has been banned since April 2012. Choosing United Kingdom opens that page and resets the inputs; amounts are not converted.
For the UK version, use the UK loan protection insurance calculator in pounds.
Inputs for the US credit insurance calculator
Loan amount
The loan before the premium is added, in US dollars.
Interest rate
The yearly note rate.
Term
How long the loan runs, in years.
Single premium
The credit insurance premium from your loan papers.
CALCULATOR QUESTIONS
US credit insurance calculator questions
How much does credit insurance add to a loan?
The premium plus interest on it. A $600 premium on a 4-year loan at 11% costs $744.35.
Is credit insurance required?
Usually not. If a lender requires it, the premium must be counted in the finance charge and APR.
What does credit life insurance cover?
It pays off the loan if you die. Credit disability cover makes payments if you can't work.
Can I cancel credit insurance?
Usually, often with a refund of the unearned premium. Check your policy.