Credit insurance

As a result of fears of recession, credit insurance has become a popular product usually included in credit agreements. It covers the amount owed should the insured be unable to make credit payments as result of death, disability or retrenchment. While creditors provide credit insurance to protect their investments, companies exist to specialize in such insurance which protects an insured’s complete amount of debt.

Note: credit insurance is not the same as credit shortfall insurance. Should a vehicle, for example, be lost as a result of an accident or theft, the insurance company will only pay out its current value. This value is often lower than the amount still owing on the vehicle. Credit shortfall insurance will pay out the difference between how much the insurance company pays on the car insurance policy and the amount owed to the bank.