What is credit insurance and how does it work

Credit insurance guarantees a lender will be repaid if a borrower is unable to pay his or her debt due to, for example, death or disability. Although credit insurance is solely for the benefit of the lender, it is purchased and paid for by the borrower.

What is the most common type of credit insurance?

There are five types of credit insurance; four for consumer credit products and the fifth for business. These are: 1) credit life insurance, 2) credit disability insurance, 3) credit unemployment insurance, 4) credit personal property insurance, and 5) trade credit insurance/family leave or leave of absence insurance.

What are the types of credit insurance?

Credit life insurance pays off a borrower's debts if the borrower dies. You can generally purchase it from a bank at a mortgage closing, when you take out a line of credit, or when you get a car loan, for examples.

Which type of credit insurance pays your debt?

The primary purpose of credit insurance is to cover risk of delayed payments, buyer insolvency, withdrawal of trade licenses, government action preventing buyer payment. A buyer default due to a disputed trade credit or losses created due to currency risks are not covered.