What are the different types of Consumer Credit insurance?

By | September 29, 2016

Credit insurance is a type of life insurance plan which is purchased by a borrower that pays off one or more accessible debts in the incident of a death, disability or unemployment (in rare cases). It is a tool which is used for protecting the organizations against the risk of non payment of accounts receivable; in both the international and national markets. It is due to the declared insolvency that is suspension of payments with creditors or bankruptcy or for non payment of credits for more than 6 months.

The Credit Insurance strategy mainly covers

  • Indemnity for unpaid credits
  • Management and collection services
  • The inevitability of risk prevention and selection
  • Portfolio follows up


Credit insurance can be broadly classified into three; these are as following:

  • Mortgage Protection insurance:

Mortgage protection insurance protects your mortgage interests in the occasion that you meet with a mishap suddenly. This type of insurance is believed to protect the borrower’s capability to reimburse the mortgage for the lifetime of the mortgage. When the insurance begins, the worth if the insurance plan must equal the capital outstanding on the reimbursement mortgage; and the termination date of policy must be the same as the date which is scheduled for the final payment on the reimbursement mortgage. Then, the insurance organizations calculate the yearly rate at which the insurance plan should reduce in order to the mirror the worth of the capital outstanding on the reimbursement mortgage. Even though the customer is behind on the repayments, the insurance will usually adhere to its original agenda and will not keep up with the exceptional debt.

  • Loan protection insurance

Loan protection insurance takes care of your loan under the various conditions such as when you suffer from a loss of work, get sick or injured and many others. In a similar manner your whole loan amount would be repaid in case your die untimely. A loan will frequently turn out to be a vast load upon your finances. It would be a good practice for making the regular imbursements towards your loan and also ensure a credit rating in a smooth way under situations when you cannot work because of any accident. The significant areas that you would need to evaluate in this case are: period for which your disability claim would be fed, policy clauses and the waiting time before you would receive the advantages.

  • Credit card insurance

Credit Card Insurance is also often branded as Credit Protection. This ensures the safety toward your credit card in a situation that you are cresting fallen at work. If in a condition that you are injured or ill then this insurance policy will ensure that your compensations are made efficiently that is in timely manner. If the outstanding money gets paid on time then it will gradually helps you in achieving a good credit rating. Many times they will just freeze all the transactions on your account for stopping any additional damages. You just need opt for a policy amount that is proportional to the outstanding amount on your credit card.


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