What Is Credit Insurance?

When you apply for a loan the lender usually asks if you want to buy credit insurance. Sometimes, credit insurance is a condition of the loan. Before you buy this insurance it's important to understand what credit insurance is and determine whether you need it.

The main purpose of credit insurance is to protect the lender if, for some reason, you can't make your payments. In times of hardship, it can also benefit you and your loved ones. There are four main types of credit insurance:

• Credit Life Insurance which will pay off some or all of you debt in the event of your death.
  
  
• Credit Disability Insurance makes payments on the loan while you can't work due to illness or injury.
  
  
• Involuntary Unemployment Insurance pays your loan payments if you become unemployed through no fault of your own.
  
  
• Credit Property Insurance pays the creditor in the event that property you used to secure the loan gets destroyed by theft, accident, or natural disaster.