Before responding to these questions, however, we would like to offer a general comment on the role of credit insurance and its benefits to consumers. Typically, it can be purchased in the form of credit life insurance or credit disability or unemployment insurance. Credit disability or credit unemployment insurance will pay a borrower s monthly payment to a creditor while the borrower is disabled or unemployed. Credit insurance can be purchased as a single policy or as part of a group policy. If purchased as part of a group policy the policy is issued to the creditor and the debtor becomes a certificate holder in the group.
Credit insurance benefits the consumers of credit and facilitates the credit-granting process.
For an individual consumer, credit insurance satisfies a consumer s obligation to pay a debt in certain unwelcome but very real life events. In other words, for many consumers, credit insurance is a small price to pay for the peace of mind in knowing that a debt will be satisfied or delayed in the event of death, disability or unemployment. For creditors, it provides the assurance that they will be paid even if the borrower suffers death, disability or unemployment. Because of its association with the credit-granting process, banks and bank holding companies have long been engaged in the sale and underwriting of credit insurance. For example, the operation of a credit life-insurance program in connection with bank loans is clearly within the scope of banking operations as presently conducted.