Credit insurance coverage is a type of insurance available both to businesses as well as individuals. In this credit insurance coverage the insurer will get coverage for any debt payment that is outstanding due to some incident that is covered by policy terms.
Some of the common incidents that are provide coverage as per the terms of credit insurance coverage are job loss by any means, death of the person who is having credit insurance coverage and disability of certain types that occur to policy holder as a result of an accident.
This credit insurance coverage provides protection and benefits to both policy holder as well as the lender. Credit insurance coverage policy holder will get peace of mind for any debts that are outstanding at the time of events like accident or job loss will be paid off. At the same time his family too need not worry incase of death about debts that are outstanding. Lender can make sure that his amount will be paid off without any complication even in the incident of death of the insurer. He will get full payment even if the debtor becomes jobless or even if he becomes disabled due to an accident.
If the insurer is a business owner issues related to amounts receivable can be solved to a great extent with credit insurance coverage. If the unpaid accounts that are receivable of a insurer is coming under the terms and conditions of credit insurance, with the aid of a third party underwriter the insured person can seek for recovery in an instance of bankruptcy that occurred to the client. But the credit insurance coverage given to insurers as per the policy varies in business related credit insurance coverage. Usually the amount for which protection can be claimed as per credit insurance coverage varies and is limited. The variation and limitation is as per the rules and regulations of the country where credit insurance coverage is provided
While going for a credit insurance coverage please know that the policy provides protection only to current unpaid debts. This means that those debts which are already unpaid at the time of taking the policy will not be covered but those debts that becomes unpaid after the taking of policy is not given credit policy coverage as per the terms of policy.
Nowadays to make the position secure the lenders are offering borrowers credit insurance coverage at the time of borrowing of money and the borrower needs to make payment as monthly installments. Some countries insist the lenders to offer credit insurance coverage at the time of extending a loan. But the law does not impose borrowers to purchase the policy offered by the lender. Credit insurance policies can be purchased independently by the borrowers.
Thus, credit insurance coverage has different advantages and disadvantages. But it is a fact that, this financial instrument helps people in their day to day affairs and is a boon for the mankind.