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The credit insurance market is one made up of companies providing both businesses and consumers with protection against the possibility of credit default. For a business, this default occurs when buyers of its goods or services are extended credit but fail to make timely payment. Consumers may seek out the credit insurance market to protect against some calamity which may cause them to struggle with their own credit obligations. Insurance companies in this market seek to gain customers by offering competitive premium rates and extras like risk assessment and collection services.
Much of the world's business is done by credit being offered from seller to buyer. In the basic credit arrangement, one party purchases a product without paying immediately, but promises to pay at some point in the future. This leaves the seller relying on the buyer to eventually deliver that payment, or else that seller will be left in a precarious position. One way that consumers and companies can avoid such a default on credit is by seeking out a company in the credit insurance market.
Businesses often offer products or services to other companies based on credit. Many such businesses deal with multiple clients and extend different levels of credit to their clients based on the amount being purchased and perhaps on the history between the two companies. The credit insurance market is one means by which companies that offer credit can be protected against multiple defaults. By paying a monthly premium payment, the company can purchase insurance that will reimburse it for the loss incurred from one or more of its customers defaulting.
An individual consumer has a different relationship with the credit insurance market in that the consumer is the one being extended the credit. For that reason, an individual purchasing credit insurance would be actually protecting against his own inability to make payment. The lender would be the beneficiary of the policy if the individual has some circumstance that prevented her from making repayment. Individual loans that could qualify for credit insurance include, but aren't limited to, mortgages, personal loans, and credit cards.
Insurance companies within the credit insurance market compete with each other by attempting to offer a combination of the best price and the most beneficial services. Companies that sell business credit insurance may offer collection services to help prevent their clients from suffering delinquent debtors. Others may even measure the risk involved with a company becoming involved with a specific debtor based on that company's credit history and its ability to pay back a loan.