Credit insurance is a form of insurance coverage that is available to both individuals and businesses. The coverage provides protection in the event that the policy holder is rendered unable to pay on outstanding debt due to any incident that is covered in the terms of the policy. Common factors that may invoke the provisions contained within a credit insurance policy include the loss of a job, death of the insured party, or an accident that disables the policyholder.

The protection against losses that is provided by credit insurance is beneficial to both the debtor and the lender. For the debtor, there is the peace of mind that any debts that are currently outstanding will be settled. At the same time, the lender is assured of receiving payment in full even if the debtor should die.

In a business setting, credit insurance can provide protection against major problems with Accounts Receivable. In the event that a client goes into bankruptcy and the unpaid Accounts Receivable items meet the terms of the credit insurance, the insured party can seek recovery through the third party underwriter. The degree of protection with business related credit insurance will vary. Often, there are limits to the amount of coverage that may be obtained from credit insurance. These usually have to do with regulations that are in effect in the country of jurisdiction.

It is important to note that credit insurance generally only covers unpaid debt that is current. This means that any debts that are already in arrears at the time of filing may not be eligible for coverage. At the same time, any debts incurred after the filing are rarely covered under the terms of the policy.

Many lenders offer the option of taking out credit insurance and bundling the cost into the monthly installment payments. In some jurisdictions, lenders are required by law to offer credit insurance coverage at the time the loan is extended. However, borrowers are not necessarily required to purchase the insurance offered by the lender. There is also the option of purchasing credit insurance independently.