What is Credit Insurance?

Credit Insurance is a term to describe a family of several insurance products that will help to pay your financial obligations if you become sick, disabled, or laid off from your job. Often referred to as “Short-term” insurance or sold by creditors as protection against your job loss, this type of insurance has very specific uses, limitations and abilities to help in a crisis situation.

Short-Term Disability Insurance

This type of insurance is most often offered by employers to their employees as a supplement to their company health insurance policy, or it can be purchased from most traditional insurance brokers that you can find through this site. Usually this insurance has very low premiums because the payout tends to be low, and when you choose this insurance, you are given the choice of what payments you want to insure. Under some circumstances, the insurance will only be for your wages or a percentage of them if you are disabled and unable to work. Other insurance plans may make arrangements to pay your creditors directly in the event of your disability. Either option leaves you with the peace of mind of knowing that your mortgage or credit card or car payment debts will be handled should something happen to you. Be sure to check the limitations on this type of insurance carefully, you may be required to submit to examinations or other processes in order to prove your disability before any payments are made.

Credit Insurance

Credit insurance is offered by some creditors in order to protect both you and themselves. When you are offered credit such as to purchase a car, you may be given the opportunity to add a small, monthly premium to your bill in order to pay for insurance against the loss of your income. This type of insurance is usually more flexible in the various ways you can lose your job and still be eligible for benefits. What it does is either defer or take over payments to your bill for a certain period of time after you are laid off or fired from your current employment - again be sure to check the specific rules regarding under what circumstances coverage will begin. If you are given the option of insurance that will simply defer your payments while unemployed or insurance that will actually make payments, it is probably best to pay the slightly higher premium for the insurance that will pay your bill rather than just defer it, since many creditors are willing to work with their clients and offer payment deferments or arrangements for free under special circumstances.

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