Insurance Is Not Only To the Consumer
Creditor Insurance is an insurance which is of the same type to all the types of different suppliers in an economy. Suppliers could be of the money, goods, services or any such. So the creditor insurance, as the name goes by, is insurance available to the creditor in any transaction. When money or a payment in any other form is owed to a person, he becomes a creditor. And creditor’s insurance is an insurance policy to protect such creditor from losing his money or any other payment that was due to him. The conditions in which he could lose his receipt obligation could be varied and have numerous reasons.
The most common phenomenon due to which a creditor may lose is due to the payment default by the debtor. That is when the creditor insurance comes to the protection of the creditor. So, a creditor insurance helps the creditor receive the payments due to him by various debtors uninterruptedly in the events such as the death of the debtor, disability of the debtor, unemployment of the debtor or many such other reasons so mentioned in the insurance policy. But the creditor’s insurance is costlier and more sophisticated than a general insurance or a life insurance, as it has much higher vulnerabilities than the general insurance and life insurance.
The most common type of creditors insurance opted by the creditors are in the mortgage market. Since the mortgage market is safe and full of the collateral market, the question may occur to you whether why the lenders spend on the creditor insurance premium despite being secured by the collateral. But after the global financial crisis of 2007 – 2008, the mortgage lenders have wanted to secure a safer position since a collapse in the housing prices can trigger at any time which in turn would lead in heavy losses to the mortgage lenders. Apart from the mortgage lender’s creditor insurance, creditor insurance is also common in consumer loans, a line of credits and credit cards. To your surprise, job loss insurance is also a part of creditors insurance, and there are only a few insurers offering it.
