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Credit insurance is sold in connection with a loan, a credit card or other credit account and is designed to make payments to the lender for you if you are unable to make the payments yourself. It is important to remember that credit insurance is usually optional, and in any case you are under no obligation to purchase it from the lender.
The most common types of credit insurance are:
- Credit Life pays off the consumer's remaining debt on a specific loan or credit card account if the borrower dies during the term of the coverage.
- Credit Disability (also called credit accident and health) pays a limited number of monthly payments on a specific loan or credit card account if the borrower becomes disabled during the term of the coverage.
- Credit Involuntary Unemployment pays a limited number of monthly payments on a specific loan or credit card account if the borrower becomes involuntarily unemployed during the term of the coverage.
- Credit Property pays an amount sufficient to pay off the entire debt on a specific piece of property serving as collateral for the loan if the property is lost or damaged. Unlike the first three credit insurance products, credit property insurance is not directly related to an event affecting a consumer's ability to pay his or her debt.
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