What is Insurance?
Insurance gives people peace of mind by protecting against a significant monetary loss and financial hardship through the sharing of a risk with someone else – usually an insurance company, which is sometimes partnered with a financial institution such as a bank or credit union.
Banks and credit unions sell Credit Protection Insurance, which is also known as Creditor’s Insurance or Creditor’s Group Insurance. This type of insurance is used to pay out a mortgage or or loan balance (up to the maximum specified in the certificate of insurance), or to make/postpone debt payments on the customer’s behalf in the event of death, disability, job loss or critical illness. It can be obtained for a variety of debt obligations, including mortgages, consumer loans, lines of credit and credit cards.
For example, if someone buys the mortgage life form of Credit Protection Insurance, their mortgage balance will be paid out (up to the maximum specified in the certificate of insurance) in the event of their premature death. This often means a family can afford to remain in their home after the death of a significant income earner, without financial duress. Credit Protection Insurance can be purchased to protect people against financial losses that could be caused by a wide range of risks.
What types of Insurance are there?Some of the most common types of insurance include:
- Mortgage life insurance
- Mortgage disability insurance
- Mortgage critical illness insurance
- Mortgage job loss insurance
- Personal loan life and disability insurance
- Line of credit, disability and critical illness insurance
- Credit card balance insurance
*Credit Protection Insurance is usually offered at economical group rates.
An insurance premium is the amount of money that someone pays in exchange for the insurance coverage they want. This amount is usually paid monthly for a defined period of time. The premium compensates the insurance company for taking on the monetary risk of a potential claim by the insured. The premium is based on a number of factors including the amount of insurance coverage desired, the age of the applicant, the profile of the applicant (e.g. health status for life insurance, driving record for car insurance, etc.), and other factors.
