Creditor Insurance: Why It's Important, How It Works and the Benefits (2024)

FAQs

Why is credit insurance important? ›

In short, Credit Insurance is designed to protect your business if a customer does not pay, or goes bust, or a supplier does not deliver, or goes bust.

Creditor insurance (also called credit protection) is optional coverage you can buy to help cover your RBC debt balances in case of death, disability, critical illness or job loss (Job Loss coverage is available on eligible RBC credit cards only.

Insurance helps to protect you and your family against unexpected financial costs and resulting debts or the risk of losing your assets. Insurance helps protect you from expensive lawsuits, injuries and damages, death, and even total losses of your car or home.

Credit life insurance is generally a type of life insurance that may help repay a loan if you should die before the loan is fully repaid under the terms set out in the account agreement. This is optional coverage.

Credit Insurance helps you make better decisions quicker, improving efficiency and ultimately profitability. This gives you the comfort to focus on what you do best: growing your business instead of chasing bad debt.

Credit insurance protects your credit rating and reduces financial burden by paying off or reducing your remaining loan balance in the event of your disability or death.

You pay the premium, and if you lose your job, become unable to work due to a disability or die, the insurance protects the lender by making payments on your behalf.

A creditor is an individual or institution that extends credit to another party to borrow money usually by a loan agreement or contract. Creditors such as banks can repossess collateral like homes and cars on secured loans, and take debtors to court over unsecured debts.

Creditor's claim (sometimes referred to as a proof of claim) is a filing with a bankruptcy or probate court to establish a debt owed to that individual or organization.

No one plans to get sick or hurt, but most people need medical care at some point. Health insurance covers these costs and offers many other important benefits. Health insurance protects you from unexpected, high medical costs.

How does insurance benefit you? ›

Insurance is a financial safety net, helping you and your loved ones recover after something bad happens — such as a fire, theft, lawsuit or car accident. When you purchase insurance, you'll receive an insurance policy, which is a legal contract between you and your insurance provider.

It protects you from unplanned expenses and offers a financial cushion from accidents, illnesses and more. Insurance safeguards the financial interests of your family in your absence. It helps them cover immediate expenses and secures their long-term financial stability.

Credit insurance is a policy of insurance purchased by a borrower to protect their lender from loss that may result from the borrower's insolvency, disability, death, or unemployment.

A contract for credit life insurance is for a specific loan, and while it does pay out in the event of the policyholder's death, the payout can only be used to satisfy the loan. Additionally, the agreement only lasts for the life of the loan.

Yes, it can be done. If you have the right type of life insurance – whole life or universal life – and have been making on-time payments to it for an extended period, you may have accrued enough “cash value” in the policy to bury your credit card debt.

This insurance policy pays all or a portion (i.e. monthly payment) of the outstanding debt if an event that is named in the policy occurs (i.e. death, disability or involuntary unemployment of the insured). The insurance company usually pays the money directly to the creditor or lender.

Remember, credit insurance is voluntary

Don't let anyone pressure you into buying a policy. Lenders cannot deny you a loan or a line of credit if you don't buy credit insurance from them. But you could be required to show you're already covered or you may have to buy it on your own to get the loan.

Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.

One of the main benefits of having credit policies in place is that they help to minimise risk for the business. Credit policies establish clear guidelines for approving and managing credit accounts, which can help to reduce the likelihood of a default or delinquency.