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What Is Credit Insurance?

Credit insurance is a kind of insurance that covers the debt of the policy holder in case he is unable to do so. This term is actually an umbrella term which covers two more specific kinds of insurance - business credit insurance and consumer credit insurance. Business credit insurance refers to policies which will pay the business the amount of accounts receivables in case their customers are not able to pay what they owe. On the other hand, consumer credit insurance refers to policies which will pay the debts of the insurance policy holder in case he is unable to pay for the debts.

Of course, there are stipulations in the insurance policy which govern when a debt will be paid by the insurance provider. Depending on the fine print, reasons can include situations such as unemployment, full or partial disability due to an accident, or the death of the insured. The amount that will be covered by credit insurance also depends on the specific policy that is taken out.

Having credit insurance is beneficial for businesses, individuals, and lenders alike. While one may be in a good state at the moment, one never really knows what the future may bring. For a business, for example, if a client goes bankrupt, having business credit insurance will cover the debt that the client may have. This will save the business from a lot of headache - both literally and figuratively. For individuals, taking out a large loan may seem reasonable at one point. In the future, though, if an unfortunate event happens and he is unable to pay back the loan, having consumer credit insurance may very well save the day.

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