The insurance that pays off a car loan in the case of death is credit insurance which is an insurance you can buy during the loan process of the car loan.
The risks that are covered by credit insurance are late payments or extended payment defaults, bad debts that arise from customer insolvency, political risk such as non payment that results from climate or political related events, currency restrictions, interruption of trade or expropriation.
Credit risk refers to the possibility that either one of the parties to a contract will not be able to satisfy its financial obligation under that contract.
The three types of credit insurance are unemployment credit insurance, life credit insurance and disability credit insurance which is available to credit card customers and anyone else that takes out loans, mortgages or other debt they have to repay.
Credit insurance works by paying all or a portion of the outstanding debt in the event of the person named on the credit insurance policy were to die, become unemployed, disabled etc.
The credit insurance company pays the money directly to the creditor or lender to pay off or pay back either in full or a portion of the debt owed.
The credit insurance is optional insurance that is sold with a credit transaction, such as a mortgage or car loan, promising to pay all or a portion of the outstanding credit balance if the insured is unable to make their payments due to a covered event, such as loss of employment, illness, disability, or death.
The most common types of credit insurance include.
Credit life insurance which is insurance coverage that repays some or all of your loan if you die.
Credit disability insurance is a type of credit insurance policy that will pay if you can't work due to an illness or injury.
The following are covered under credit insurance.
Extended payment defaults (late payments).
Bad debts arising from customer insolvency.
Political risk: non-payment resulting from political or climate-related events, currency restrictions, interruption of trade or expropriation.
When you have credit insurance 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.
Credit disability insurance is generally written for 60 months, and any payments due after the insurance termination would not be covered.
Credit insurance also may not cover balloon payments that are due at the end of a loan.
Trade credit insurance insures your accounts receivable and protects your business from unpaid invoices caused by customer bankruptcy, default, political risks, or other reasons agreed with your insurer.
Trade credit insurance is also known as debtor insurance, export credit insurance and accounts receivable insurance.
Taking out credit insurance is not for everyone unless you think you may die soon or may get into financial problems.