Legal Definitions - credit insurance

Credit insurance is a type of insurance that a borrower can purchase to protect their lender from financial loss if the borrower becomes unable to repay their debt due to insolvency, disability, death, or unemployment.

For example, if someone takes out a loan and then becomes disabled and unable to work, their credit insurance company will pay off the remaining balance of the loan so that the borrower's credit score is not negatively affected and their family is not held liable for the debt.

Credit insurance is often offered as an additional service by credit card issuers or lenders when someone applies for a loan or credit card. The cost of credit insurance is usually added to the borrower's monthly bill or included in the total cost of the loan.

There are five types of credit insurance:

1. Credit life insurance
2. Credit disability insurance
3. Credit unemployment insurance
4. Credit personal property insurance
5. Trade credit insurance/family leave or leave of absence insurance

Credit insurance is also known as accounts receivable insurance, bad debts insurance, payment protection insurance, or credit protection.