Like any form of insurance, Credit Insurance , also known as payment
protection .is an insurance policy associated with a specific loan or
line of credit which pays back some or all of any money owed should
certain things happen to the borrower, such as death, disability,
rental , refinance, car loan quote ,or unemployment. Credit Insurance is usually purchased by a company to
protect itself against specific losses that could impair the performance
of the company.
The sale of credit insurance is controversial because it is almost
always cheaper for an individual to forgo credit insurance, and instead
have a term life insurance or disability insurance policy to cover the
credit balance. The reason is that credit insurance is guaranteed issue,
no matter if a person would otherwise be insurable or not. So the rates
offered must reflect this, and be worse than if a healthy or otherwise
insurable person were to purchase coverage on their own.
In the case of credit insurance, protection is offered to the supplier
against the risk of the debtor going into liquidation (Insolvency);
delayed or bad non-payment (Protracted Default) and in respect of export
risks, the unilateral cancellation of contract (Repudiation) as well as
a myriad of Political related risks.