Creditor Insurance for Mortgage Protection & Other Debts

Protecting your finances and your family’s future is an integral aspect of financial planning.

You want to prepare for the unexpected so that your family won’t have to worry about paying the mortgage, credit cards, and other financial obligations.

With creditor insurance, you can get peace of mind to protect your finances in case of disability or death.

Now that is protection you can count on! Like other types of insurance, you can choose your insurer, amount of coverage, premiums, and type of contract.

Find out how you can get the best protection you can afford with creditor insurance in British Columbia using our short online form at no cost!

What is creditor insurance for?

You already know that creditor insurance is protection against financial obligations in case of disability or death. But how exactly does it work?

Paying your debts is an obligation you can’t escape. Even if you become unemployed, sick, or die, your debts will still need to be taken care of.

One way to shield your dependents from the burden of financial obligations is to get creditor insurance. Basically, it ensures that your debts will get paid in the event that you cannot. Your policy will pay for your loans or debts such as credit cards, mortgage, credit lines, etc. if you become ill, suffer a disability, or pass away.

Usually, this type of coverage is offered to you during the loan application but it is not mandatory. You must not be pressured into buying the policy.

How creditor insurance works

Every loan you take on, whether it is a mortgage, a business loan, or a credit card, has a payment schedule you must follow. Some of these loans may be short term while others may have a longer cycle. Their interest rates will also vary.

If you become critically ill or lose your job or other unexpected misfortune, you won’t be able to make the payments and default on your obligations.

Your creditor insurance policy will cover loans you choose to cover and they will be listed in your policy. With this type of coverage, your family or dependents won’t be burdened with making the payments.

Your insurer can pay a lump-sum payment to your loan obligation or make scheduled payments to the lender. The certificate of insurance given during enrollment will indicate the maximum amount and number of payments possible. They differ based on the loan product and lender.

What are the types of creditor insurance?

Creditor insurance is offered in different types. You can choose your type of coverage based on your circumstances, including how many dependents you have.

The Financial Consumer Agency of Canada says this type of insurance is also called:

Credit insurance
Loan insurance
Debt insurance
Balance protection insurance
Balance insurance

Not all loan products give this type of coverage. For more details, you should coordinate with your insurer regarding your policy coverage.

Do you need credit insurance?

How do you decide whether to buy credit insurance to cover your loans? When you have taken out a significant loan such as a mortgage, a credit line, or credit cards, it is a good idea to review your insurance coverage.

Does your life insurance policy protect your dependents with adequate coverage?

You see, life insurance benefits can be used by your dependents to pay off your financial obligations when you die. However, your life insurance policy won’t cover them if you become ill or lose your job.

Other insurance products such as disability insurance, critical illness insurance, or group life insurance may be of help in those circumstances. Do you have these types of coverage?

Review your insurance coverage including life and health insurance. Some of these plans may give you protection benefits in case of illness, disability, job loss, or death.

If you find that your financial risks are not adequately covered by your existing policies, you can talk to your insurer about increasing your coverage.

Another way is to compare creditor insurance quotes using our short online form tailored for your specific needs.

Creditor insurance pros and cons

In our discussion above, you have learned the most important advantage of creditor insurance – it pays for your debt in the event of illness, disability, job loss, or death.

Unlike life insurance which pays only death benefits, creditor insurance can provide you with cash benefits to pay for your loan while you are living.

This type of insurance coverage is offered by the lender at the time of processing your loan application. It is not directly sold by insurance companies.

Consider the significant benefits of creditor insurance:

Avoid missed or delayed loan payments to protect your credit rating;
Avoid using emergency funds or savings to pay off debts;
Protect the ownership of your assets.
Secure the future of your dependents.

The objective of creditor insurance is clear – pay for your debt when you can’t to remove the burden from the shoulders of your loved ones.

Lastly, creditor insurance is generally easy to apply for compared to traditional life insurance.

Are there any disadvantages to creditor insurance?

Creditor insurance, as mentioned earlier, is sold by lenders like banks and other non-insurance entities.

The policy’s beneficiary is always the bank or the lender you owe money to. It won’t pay out money to your family or loved ones.
Even when your loan amount or debt gets paid down, your creditor insurance premium remains the same until your debt is completely paid off.
If you took out creditor insurance for a mortgage loan, the policy belongs to your lender. If you switch lenders, you will need to apply for a new policy.

Creditor insurance or life insurance?

Creditor insurance is not for everyone. Some individuals can be better served or covered by life insurance or disability and critical illness insurance.

On the other hand, creditor insurance can give peace of mind regarding a specific debt or loan such as a mortgage or credit card balance.

An example of someone who could benefit from creditor insurance is a single individual with no dependents who need insurance for a temporary financial risk.

You can compare terms and conditions and premiums of life insurance vs. creditor insurance to choose the best coverage for your needs!

Just fill out our short online form and speak to our partner insurers and brokers at no cost or obligation.

Where can you buy creditor insurance?

If you are wondering where to buy creditor insurance or loan insurance, it is usually offered by the lender who gives you the loan or credit card. These institutions include:

Banks
Car dealers
Credit unions
Caisse populaires
Credit card providers

You should check that the insurance gives you adequate protection. Federally-regulated banks are required to offer only products that are appropriate to your financial needs. You are not required to buy the insurance product offered and you can’t be pressured into buying loan insurance.

Buying creditor insurance when applying for a loan

Many individuals have purchased creditor insurance to cover a debt or mortgage. Lenders require borrowers to have life or disability insurance as lender protection in case of death.

Some mortgage or loan applicants may not have adequate life insurance and it can be challenging and time-consuming to apply for traditional life insurance. The easy option is to buy creditor insurance as it is immediately offered by the lender.

You will be asked to answer general health questions. Based on your answers, you could be asked to take a medical exam. Some lenders may offer creditor insurance with no health exam but they will most likely have high premiums.

What can be insured with creditor insurance?

A mortgage
A loan and line of credit (personal or business)
Credit card outstanding balances

What are the premiums for creditor insurance?

If you buy creditor or loan insurance, you can be charged a one-time premium or a recurring premium. One-time premiums are usually charged by the lender at the time of approval of your loan.

Insurance companies calculate recurring premiums by considering:

the amount of your loan at the time of application
the loan term
the average daily balance of the previous month (for credit card balance insurance)
Age, gender, and health

How much do creditor insurance premiums cost?

The cost of premiums depend on the type of coverage. You have to fill out an application for insurance and provide health information. In most cases, you can automatically enroll for coverage through your lender. You can also cancel your policy at any time.

There is no fixed answer for the cost of creditor insurance premiums as they vary based on multiple factors.

For credit card balance insurance, insurers may charge $1.20 or more for every $100 of your credit card average daily balance plus taxes. This type of creditor insurance policy will pay for your credit card bill when you lose your job, get sick, or pass away.

Compare free quotes for credit or loan insurance tailored to your needs by filling out our online request form.

What are the terms and conditions of creditor insurance?

Creditor insurance terms and conditions vary depending on the insurance provider. Such terms and conditions will indicate what claims you are allowed to make. Other guidelines will include:

The maximum amount you can claim;
The specific conditions under the policy (for critical illness)
Qualifications for disability coverage (how disability is defined)
If job loss is covered if self-employed.

Some circumstances may be excluded by your creditor insurance policy. For instance, some conditions like high-blood pressure, asthma, or heart disease may be excluded.

Some insurance policies may not approve claims if:

A pre-existing condition is related to the insurance claim;
You got terminated by your employer for cause
You resigned from your job
Your employment is contractual.

Consider Life Insurance for Credit protection

Creditor insurance products from lenders are sold by employees who are not from the insurance industry. They don’t necessarily know how to assess your overall insurance needs. They offer creditor insurance for the sole purpose of protecting the lender’s interests.

Did you know that you can also get protection for your loans or mortgage with life insurance? Life insurance products are sold by insurance representatives who make an assessment of your insurance needs based on your financial status and lifestyle.

Life insurance DOES MORE than just creditor insurance. It provides security for your financial obligations by giving benefits to your dependents and not the lender. Your beneficiaries have the freedom to pay your loans and can get extra money for their needs.

Get Credit Insurance with Free Quotes from our Partners

The decision to buy creditor insurance is a personal one. It is optional coverage for your loan which can supplement your life insurance, disability insurance, or critical illness insurance.

If you have multiple loans or significant debts that your family would have a hard time paying due to unforeseen events, your creditor insurance coverage will get those bills settled.

It will give you relief from debt when you become hospitalized, get laid off, or unable to work due to disability.

You can also choose TERM LIFE INSURANCE or LIFE INSURANCE WITH CRITICAL ILLNESS as financial protection. Before you choose the type of insurance to buy for credit protection, compare your options!

You can compare insurance quotes for credit protection using our short online form! These quotes are free and no obligation on your part.

Get peace of mind knowing that your financial obligations will be paid should something unexpected happen.

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