Debt Insurance taken out to protect against bad debts. It is organized to help borrowers by providing financial support in times of need. Whether it’s due to unemployment, sickness, or disability, debt insurance can protect the insured from defaulting on their loans.
Types of debt insurance, each paying its benefit in different ways:
- Debt Life Insurance
This type of life insurance pays off all outstanding loans and debts if you die.
- Debt Disability Insurance
Also called accident and health insurance, this type of credit insurance pays a monthly benefit directly to a lender equal to the loan’s minimum monthly payment if you become disabled.
For some credit card holders, debt insurance may be a costly character in comparison to its benefits. You must be disabled for a certain amount of time before a benefit is paid. In some situations, the benefit is retroactive to the first day of disability.
- Unemployment Insurance
With this type of insurance, if you become involuntarily unemployed, this insurance pays a monthly benefit directly to the lender equal to a loan’s minimum monthly payment.
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You must remain unemployed for a certain number of days before a benefit is paid. In some cases, the benefit is retroactive to the first day of unemployment. In other cases, the benefit begins only after the waiting period is satisfied. The common waiting period for credit unemployment insurance is 30 days.
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