When you finance a car through a dealership, you'll almost certainly be asked if you want to buy credit life insurance. Sometimes it's even added in without you being told, so be sure to look at every line on the financing sheet to make sure there's nothing there that you didn't ask for. Credit life insurance pays off the balance of your loan if you die. Remember that the finance manager who does your paperwork gets paid a commission on the insurance and warranty products she sells, so she's not an objective source of information if you're trying to decide whether credit life insurance is a good thing. In most cases, the answer is no. If you want this type of protection, you should buy term life insurance, which is much cheaper and provides more protection for your family.

The beneficiary of your credit life insurance policy is your lender, not your loved ones. With term insurance, your family or other designated beneficiaries receive the proceeds from the policy directly and can use them as their needs dictate.

You'll probably also be encouraged to buy credit disability insurance, which would make your car payment for you if you became disabled and couldn't work. You may be able to buy disability insurance through your employer much less expensively that will pay a portion of your salary if you're disabled. You might even look into an individual disability policy that doesn't go away when your loan or your job does.

The credit disability through your lender only covers your car payment. If you can't get life or disability insurance any other way because of a medical condition or previous disability, you might consider credit life or credit disability if you're concerned about your family's ability to make the car payment if you die or become disabled.