Credit health insurance

What is credit health insurance?

Credit health insurance is a policy that protects the creditor should the debtor become disabled.

Deeper definition

Credit health insurance is an insurance policy that protects a creditor if the borrower or debtor becomes unable to pay his or her debt due to a long-term illness or disability. Generally, you will see this type of policy offered with credit cards.

If an individual becomes disabled or terminally ill while a balance remains on the credit card, the credit health insurance policy will take care of that balance.

Most often, there will be a monthly fee that needs to be paid to take advantage of credit health insurance. Sometimes this is a set monthly fee, and sometimes it is a percentage of the credit card’s balance at any given time.

There are also credit insurance policies that cover death and even unemployment.

Credit health insurance example

When a person uses a credit card, he or she is borrowing money from the institution that issued the credit card (the creditor). When a credit health insurance policy is in place, the creditor is protected should the cardholder become disabled and therefore unable to pay the balance on the credit card.

If this occurs, the insurance policy would cover whatever remaining balance the individual has on the credit card. In other words, the creditor would get the money it is owed and the individual wouldn’t be left with an unpaid credit card bill that eventually would go to collection.

These policies are put in place to protect  the creditor and debtor from the consequences of unpaid balances. Credit health insurance most often covers disability or long-term illness that results in the person no longer being able to work.

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