When we hear credit, most of us associate it with credit cards, and it seems to be a completely natural connotation.  It is important, however, that we do not think of credit insurance as something good to have at a time when we lose the wallet with a credit card in it.

It may happen that, while applying for a personal loan or mortgage, an associate will ask if we want to purchase credit insurance, and this is one of those moments when we really ought to understand what he or she means.

Nobody wants to think about misfortunes, but unfortunately they are a part of our lives and we need to take them into account upon making decisions.  Needless to say, applying for personal loans or committing to years of paying mortgage are among our most important financial decisions. This is exactly when we should take a moment and, based on our individual preferences and needs, decide if and what kind of credit insurance policy to take. Simply put, credit insurance protects policy holders when they are unable to make outstanding monthly payments due to a job loss, an accident, or death.  It is beneficial to both parties involved, the lender and the debtor.  Such policy is a lenders’ guarantee that any outstanding debts will be settled no matter what, while we, debtors, know that our monthly payments will be made even if things do not go the way we planned.

Credit insurance policies also exist in the world of business where they protect clients, as well as accounts receivable departments of companies that grant credits to debtors. It other words, should a client go bankrupt and leave some part of the credit unpaid, the insured lender may seek financial recovery through a third party. It is not uncommon that credit insurance policies have limits to the amount they cover so, whether we are individuals or represent companies, it is always wise to find out all the details. Life insurance may be used to cover your mortgage or vehicle loan in case of your premature death.