Finance and Economics Discussion Series (FEDS)

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December 2017

New Evidence on an Old Unanswered Question: Why Some Borrowers Purchase Credit Insurance and Other Debt Protection and Some Do Not

Thomas A. Durkin and Gregory Elliehausen

Abstract:

Credit related insurance and other debt protection are products sold in conjunction with credit that extinguish a consumer's debt or suspends its periodic payments if events like death, disability, or involuntary unemployment occur. High penetration rates observed in the 1950s and 1960s raised concerns about coercion in the sale of credit insurance. This study presents evidence on credit insurance purchase and debt protection decisions from a new survey. The findings provide little evidence of widespread or systematic coercion in purchases. Instead, findings suggest that risk aversion and health or financial concerns motivate consumers to purchase credit insurance and debt protection, just as these concerns also motivate purchases of other types of insurance.
Accessible materials (.zip)

Keywords: Consumer Protection, Credit Insurance, Insurance, Personal Finance

DOI: https://doi.org/10.17016/FEDS.2017.122

PDF: Full Paper

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Last Update: January 09, 2020