Creditors Insurance: Are Consumers Being Well Served?

Author

Howard J. Deane, Ken Whitehurst

Organization

Consumers Council of Canada (CCC)

Published

2009

Summary

Creditors insurance is found on credit cards, lines of credit, personal loans, and mortgages, and may assist in protecting consumers' credit ratings and provide relief to individual and family finances from the obligations associated with existing credit in the event of a borrower's death, critical illness, disability or involuntary job loss. A range of insurance products exist fitting this general description.

This research sought to answer the following questions:

• What is creditors insurance?
• When would consumers seek out this product?
• Who provides this product and where do consumers typically purchase it?
• Are consumers aware of their options?
• Is time available to examine alternative products and their cost structures?
• Would the consumer be better served purchasing Term Life or Disability Insurance?
• Are consumers paying too much?
• Is tied selling a problem?
• Do consumers feel rushed to make a buying decision?

This report seeks to make practical recommendations. Accordingly, these recommendations seek incremental and directional, rather than idealistic, improvements to the creditors' insurance marketplace, which will assist consumers in determining the efficacy of creditors insurance products for their needs. No amount of legislation, regulation, disclosure or confirmation of assent can protect a consumer from themselves. A balance must be found between the responsibilities of buyers and sellers to exercise due diligence in a marketplace relationship. Through the implementation of these recommendations, the distributors of creditors insurance can improve their performance in serving consumers and meeting their own strict stated standards.

The recommendations of this report, if implemented, aim to improve consumer confidence that the creditors insurance marketplace is reasonably open and transparent and to contribute to confidence in the integrity of creditors' insurance providers and distributors.

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OCA Funded Research
This research received funding support through the Office of Consumer Affairs' Contributions Program.

Contact information

Source: Consumer Policy Research Database