Credit Insurance: Protecting Against Default Risk
Credit insurance is a policy purchased to protect the insured party against financial losses resulting from the non-payment of a debt. It functions as a critical risk management tool across commercial transactions and consumer lending.
This is the most common form of credit insurance, designed to protect businesses (the seller) that offer credit terms to their customers (the buyer).
Mortgage Insurance (PMI): While often not called "credit insurance," its function is to protect the lender if the borrower defaults on a mortgage and the foreclosure sale does not cover the outstanding loan amount.
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