Simple English definitions for legal terms
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Credit insurance is a type of insurance that a borrower buys to protect their lender from losing money if the borrower can't pay back their loan. If the borrower becomes unable to pay due to things like disability, death, or unemployment, the credit insurance company pays off the debt. This helps protect the borrower's credit and their family from having to pay the debt. Credit insurance is usually offered by credit card companies or lenders when someone applies for a loan or credit card. There are five types of credit insurance, including credit life insurance, credit disability insurance, credit unemployment insurance, credit personal property insurance, and trade credit insurance. The cost of credit insurance is added to the borrower's monthly bill or included in the total cost of the loan.
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:
Credit insurance is also known as accounts receivable insurance, bad debts insurance, payment protection insurance, or credit protection.