Credit disability insurance, also known as accident and health insurance, generally is an agreement between the borrower and an insurance company. If you have a credit disability policy and you become ill or injured and cannot work, the insurance company makes payments on the loan under the terms set out in the agreement.
This is optional coverage. When purchased, the cost of the policy may be added to the principal amount of the loan. In some circumstances, the lender may be required to disclose certain terms and costs related to the insurance. Some policies combine Credit Life and Credit Disability into one policy and may contain provisions for cancelation of the policy.