Merritt Personal Lines Manual: Credit Health Coverage

Not all forms of group health insurance are cost effective. Credit health insurance is usually written as a group disability income contract although it could also be an individual policy. The purpose of credit health is to provide payment of the insured's debt if the insured is disabled due to accident or sickness.

The creditor is the policyowner -- or the insured's employer -- and the insured is the debtor. Disability benefits equal to the insured's debt are paid directly to the creditor in the event that the insured become disabled in accordance with policy provisions. These benefits are usually paid on a monthly basis as long as the debt remains and the insured is sick.

By most reckoning, credit health coverage -- even purchased on a group basis -- is not a very cost-effective kind of insurance.