What is Credit Protection Insurance?

This type of insurance has two key benefits. First, Credit Protection Insurance offers affordable protection that is easy to obtain at your financial institution. Second, it provides some forms of protection that are not readily available elsewhere, such as job loss insurance.

Here’s another example of how Credit Protection Insurance works:

Alisha would like to purchase job loss insurance so she can continue to make debt payments and maintain her good credit rating should she involuntarily lose her job. But for individuals, job loss insurance is difficult to find and expensive to purchase. So Alisha decides to purchase Credit Protection Insurance on her credit card, knowing that job loss insurance is a key component of that coverage. In addition, since this type of insurance is normally sold as a part of a group policy, it is usually less expensive than buying job loss insurance as a separate coverage on its own. With this protection, if Alisha involuntarily loses her job, she can count on her insurance to make the minimum monthly payments on her credit card balance.

A Credit Protection Insurance premium is the amount of money that someone pays for insurance that will pay out a loan balance (up to the maximum specified in the certificate of insurance) or make/postpone debt payments on the customer’s behalf in the event of death, disability, job loss or critical illness. The premium is usually paid monthly for a defined period of time. For the most part, the premium is based on the balance or payment amount being insured, and the age of the applicant.

The cost of your insurance will usually be based on the balance or payment amount being insured, and your age. All types of credit protection insurance coverage are provided under a group policy rather than being individually underwritten. This means more Canadians can be insured at economical standard group rates.

Credit Protection Insurance can be purchased at the financial institution where you have your mortgage, personal loan, line of credit or credit card. Many banks and credit unions in Canada, including most CAFII member financial institutions, offer various types of Credit Protection Insurance. Employees at CAFII member institutions are trained and knowledgeable about the products they sell, and they can be conveniently reached in branches or at call centres. In addition, you’ll find that the terms and enrollment process for Credit Protection Insurance are relatively straightforward. You can find a list of CAFII member institutions at: http://members.cafii.com/members_voting.