Credit Insurance

What is Credit Insurance?

Credit insurance is insurance that consumers buy to pay their loan if they become disabled or unemployed. There are many types of credit insurance. The cost of credit insurance varies according to the credit protection and creditors must disclose this to you in writing. In some cases, electronic disclosures can be acceptable.

Types of credit insurance

Credit life insurance

A common type of credit insurance is the credit life insurance. What is credit life insurance? Credit life insurance will pay off the balance owed on covered debt in the event of your death.

Credit accident and health insurance

A credit accident and health insurance will make minimum monthly payments on the covered debt for the time you are unable to work because of an accident of illness. However the credit accident and health insurance usually does not become available until you have been disabled for a period of time. During that uncovered period, you are responsible to pay your debt.

Unemployment insurance

Unemployment insurance provides for payments on covered debt during the period which you are involuntarily unemployed. However, there may be a waiting period for unemployment insurance as well.

Does credit insurance affect creditor's loan decision?

Whether you accept the credit insurance or not should not affect the creditor's decision to approve your credit application. If you accept the credit insurance, you must do so in writing indicating your decision to purchase the credit insurance. Some lenders, however, will require you to have credit insurance. If the lender requires credit insurance, it must be disclosed at the time of credit application. The cost and finance charges concerning credit insurance must be disclosed and approved by you.