Credit insurance

From ArticleWorld

Credit insurance may be defined as insurance that covers payments on loans should the borrower not be able to meet the obligation due to illness or unemployment. It is also known as payment protection. This implies that in case the borrower dies or becomes disabled before paying off the loan, the policy will pay off the remaining balance. The standard insurance policy that includes the coverage for health, life accident, or involuntary unemployment is calculated to make the monthly payment or the outstanding balance of debts. This kind of insurance is optional and involves an additional amount of premium.

Types of credit insurance

There are basically three types of credit insurance coverage that are available to the consumer:

1. credit life insurance is a term based insurance policy that pays off installments on loans in case of death.
2. credit health insurance is a disability insurance that makes the payments on loans in case of illness or injury or accident and a resultant loss of work.
3. credit involuntary unemployment insurance is insurance that makes loan payments in case of lay offs or in cases of loss of work due to the insured being fired from work (unless the insured is fired for intentional misconduct).

History

Although credit insurance may be said to have originated during the end of the 19th century it came into its own between the first and the second world wars. This was the time when, credit insurance companies came up in almost all the countries of Western Europe and their business grew to an extent that they exported their services to other countries.

Allianz, Atradius and Coface are the three top credit insurance companies in the world today.