 Sam
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 Posted: Thu Apr 08, 2004 11:31 pm Post subject: Credit-Related Insurance |
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Credit-related insurance is the insurance sold together with consumer credit. The policy terms and benefits of such insurance are related to the concerned consumer credit transaction. It provides assistance to a borrower in paying a loan or line of credit in case the concerned individual passes away or meets with an accident, becomes disabled, suffers from major health breakdown or faces some other major problem as per the type of insurance plan.
In legal terms credit-related insurance is defined as insurance over goods used as security. It also implies 'gap insurance' meaning it acts as a cover for the difference between the amount that an insurance policy pays (in case the secured goods are destroyed) and the outstanding amount under the credit contract. Another legal definition/interpretation of credit-related insurance is that it stands for consumer credit insurance. This means that it serves as a cover for a customer's outstanding obligations under a credit contract if they get injured, become ill or pass away.
It is to be kept in mind that credit-related insurance is taken out by the customer and not the lender. Credit-related insurance can be purchased from automobile dealerships, banks, credit unions, finance companies and retailers who offer credit or loans to borrowers.
Insurance coverage needs to match the amount of credit. It can be less than the amount and/or term of the loan but not more than the loan amount. Credit-related insurance relieves worries of the borrower and lender-both. Mounting medical bills and income setback incurred owing to death, disability and the like may create stress on the financial backbone of a family. It is in such unfavorable periods that credit-related insurance comes to one's aid. |
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