The next time you apply for a third party insurance, you may be asked if you want to buy third party insurance, or it might already be included in your loan proposal. third party insurance protects the loan on the chance that you can't make your payments. third party insurance usually is optional, which means you don't have to purchase it from the lender. In fact, the Federal Trade Commission (FTC), the nation's consumer protection agency, says it's against the law for a lender to deceptively include third party insurance (or other optional products) in your loan without your knowledge or permission. There are four main varieties of third party insurance: third party insurance off all or some of your loan if you die.Credit disability insurance, also known as accident and third party insurance, makes payments on the loan if you become ill or injured and can't work. Involuntary third party insurance, also known as involuntary loss of income, makes your loan payments if you lose your job due to no fault of your own, such as a layoff. third party insurance protects personal property used to secure the loan if destroyed by events like theft, accident or natural disasters. How much is the premium? Will the premium be financed as part of the loan? If so, it will increase your loan amount and you'll pay additional interest, and more for points (if points are on your loan). Can you pay monthly instead of financing the entire premium as part of your loan? How much lower would your monthly loan payment be without the credit insurance? Will the insurance cover the full length of your loan and the full loan amount? What are the limits and exclusions on payment of benefits - that is, spell out exactly what's covered and what's not. Is there a waiting period before the coverage becomes effective? If you have a co-borrower, what coverage does he or she have and at what cost? Can you cancel the insurance? If so, what kind of refund is available?