What is creditor insurance and why should you consider it?

You're doing everything possible to secure your financial future: from saving for a rainy day to contributing to an RRSP, to setting aside money for your child’s education. But are you prepared for the unexpected? Have you considered how having optional creditor insurance protection could help eliminate or make your debt payments without impacting other financial plans?

For example, if you have health insurance through an employer, you may assume that you’re fully covered and you may not need this type of insurance. However, creditor insurance specifically protects your debt commitments against many scenarios, helping you and your loved ones by providing the financial support needed when unexpected life events happen.

Creditor insurance is optional insurance that can help provide financial stability to you and your loved ones by paying off your outstanding credit or loan balances or covering those payments, for a period of time, in the event of an unexpected life event. If you've got a mortgage, line of credit, credit card, business or car loan, it's a good idea to consider optional creditor insurance to protect yourself financially.

Scotiabank offers a range of creditor insurance protection coverages, allowing you and your family to breathe easy knowing that your Scotiabank debt can be covered if the unexpected happens. 

Depending on the outstanding balance you’re looking to cover, creditor insurance can work in two different ways:

• Lump-sum: Should you become critically ill or pass away, your debt could be paid off (up to the maximum amount specified in the Certificate of Insurance) as a lump sum on the specific credit product you added creditor insurance protection to.
• Monthly payments:  If your income is disrupted due to disability, job loss or a labour strike/lockout – and depending on the debt balance you’re looking to cover – your insurance can make monthly payments to your insured debt for a period of time, and help you get back on your feet.

Note that there are different terms and conditions around creditor insurance and it’s important to learn how it works with your provider. 

Ensuring that you and your family are financially protected from any surprises is at the top of sound financial planning. Here are some reasons why considering creditor insurance is a smart move:

• Financial stability for you and your family. The last thing you need to worry about during an emergency is how to pay your bills. Should an unexpected life event arise, your insured Scotiabank debt could be paid in full, or monthly payments will be maintained for a period of time until you get back on your feet.
• Fills the gaps. Creditor insurance protects your debt obligations against certain unexpected life events (e.g., job loss) that may not be covered by life or other insurance policies.  If you do have other insurance coverage, then you can direct those proceeds to where you feel it’s most urgently needed without having to worry about using it to pay your outstanding debt.
• Flexible. From protection for your mortgage to credit card debt to business loans, Scotiabank offers a range of coverages to match your unique life circumstances.
• Easy to apply: Enrolling is simple and can be done online, over the phone or in person. Enrollment approval is often immediate.

There's no “one-size-fits-all" approach to getting creditor insurance protection insurance. It involves evaluating your unique situation, assessing everything from your financial goals and priorities, stage of life, types of insurance you already have, and budget. When deciding what insurance to include, ask yourself the following questions:

• What type of coverages do you currently have? Keep in mind that optional creditor insurance protection complements other forms of insurance like employer work benefits, or other insurance plans, that were to be allocated for other needs, such as looking after your loved ones financially. So, make sure you read the fine print of each policy, understand the terms and conditions, and breakdown the benefit you're entitled to if the unexpected strikes. Are you fully protected? Make a plan to fill any gaps that could leave you or your family unprotected.
• Do you have a mortgage? Scotia Mortgage Protection safeguards your most valuable asset – your home – If you're diagnosed with a covered critical illness, become disabled, or suddenly pass away. The policy could help make sure your Scotiabank mortgage balance is paid in full or have your payments maintained until you get better. Allowing you and your family to stay in your home during what may be a very difficult time.
• Do you have credit card debt? Scotia Credit Card Protection can pay off your credit card account balance if you're diagnosed with a covered critical illness or pass away. If you lose your job, are hospitalized, go on strike, or experience a lockout, it can also provide a monthly benefit to help pay off the outstanding debt on your credit card.
• Do you have a line of credit? Scotia Line of Credit Protection cover the entire outstanding balance or makes monthly payments for a period of time if you're diagnosed with a covered critical illness, become disabled, involuntarily lose your job, or pass away.
• Do you have a business loan? If you or a critical employee loses the capacity to work, Scotia Business Loan Protection can make regular payments or completely pay off your Scotiabank business line of credit, loan, or credit card. Also, your business debt will be paid off up to $2,000,000 if an insured person passes away – the balances owing are paid and, if there’s a difference between balance and credit limit, the remainder gets paid to the business.
• Do you own a car? Scotia Loan Protection can help pay your monthly Scotiabank Auto Loan payment should you experience a critical illness, disability, or job loss. It also includes life coverage that pays off your balance if you pass away.