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Credit Insurance

US: A guarantee to manufacturers, wholesalers, and service organizations that they will be paid for goods shipped or services rendered. Applies to that part of working capital which is represented by accounts receivable.
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Also known as “trade credit insurance” and “business credit insurance,” this coverage pays an agreed percentage of an invoice or receivable that is not paid because of protracted default, insolvency, or bankruptcy of the debtor. The coverage is written by only a few companies that specialize in credit insurance and is not available to individuals.
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US: Coverage against insolvency of a customer, which provides protection against payment default on loan, interest, or scheduled payments. Also known as “bad debts” insurance.
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Credit Insurance provides protection against loss resulting from default on the part of debtors. Insurance on a debtor in favour of a creditor to pay off the balance due on a loan in the event of death or disability of the debtor. Liability Insurance for abnormal loss from bad debts. With a view to standardizing the features of Credit Insurance products in India IRDA issued Guidelines on Trade Credit Insurance policies which are effective from 13th December, 2010. These guidelines specify that a policyholder should necessarily be a supplier of goods and services and his coverage under the policy should be towards loss incurred due to non-receipt of trade receivables. The credit cover can only be issued on whole turnover basis covering all buyers.
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MEDICAL,USA: Insurance coverage that will pay off an outstanding loan if the policyholder dies or makes loan payments if the policyholder becomes disabled.
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Optional coverage that pays off the balance of an outstanding loan in the event the insured becomes disabled, unemployed, or dies. Exact coverage depends on the particular policy. Variations include credit life (pays if the insured dies), credit health or disability (pays if the insured gets sick or becomes disabled) and credit unemployment insurance (pays if the insured involuntarily loses his job). Usually offered with credit cards, auto loans, and mortgages.
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UK: This covers businesses against losses due to ‘insolvency’ or ‘protracted default’ (failure to pay within 90 days of due date) of customers to whom credit has been granted. It is effectively bad debts insurance. Policies usually cover between 75 per cent and 90 per cent of the risk. The main policies: ‘whole turnover (UK)’, ‘whole turnover (export)’ ‘specific account(s)’, ‘catastrophe’, i.e. cover that is triggered once an aggregate bad debts figure has been exceeded. See EXPORT CREDIT INSURANCE; OVERSEAS INVESTMENT INSURANCE.

Credit life insurance

UK: A decreasing term insurance to cover the outstanding debt under hire purchase and credit sale agreements. Cover is provided under a collective policy to the creditor, e.g. finance company, to facilitate repayment on the death of any hirer or debtor. Arrears are not covered. Limits are placed on the age attained (e.g. 60 or 65) of any hirer or debtor and the length of the finance agreement (e.g. three years). Premiums are based on the average outstanding debt in accordance with returns supplied by the assured.
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Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan.
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This type of life insurance pays the balance of a loan in the event the borrower dies before the loan is repaid. There are two common ways to purchase credit life insurance. One way is to purchase the coverage from the lender. This is normally a group life insurance policy with a flat rate per $1,000 borrowed regardless of age or health. Coverage decreases as the loan balance decreases. The lender is the beneficiary and upon the death of the insured the loan is repaid and there is no money left over.Alternatively, a borrower can purchase a decreasing term insurance policy. This is a term insurance policy for a fixed term (for example, 30 years to cover a mortgage) and coverage decreases each year at the same rate a mortgage at a certain interest rate would decrease. The borrower may name the lender as primary beneficiary but can name anyone. If there is more money from the death benefit than is owed the lender, the balance goes to the contingent beneficiary.Some lenders may add credit disability to a credit life policy. This coverage pays the insured’s regularly scheduled loan payments for some specified time period such as 1 or 2 years.
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MEDICAL,USA: Type of decreasing term insurance calculated to pay the balance due on a loan, installment purchase, or other obligation, in case the borrower dies before the loan is repaid. Another form is credit group life insurance for insuring lives of a group of persons who are in debt to a creditor.