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 E. Elliehausen

No 2017-122, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

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.

Keywords: Credit insurance; Personal finance; Consumer protection; Insurance (search for similar items in EconPapers)
JEL-codes: D14 D18 G22 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-12-18
New Economics Papers: this item is included in nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2017-122

DOI: 10.17016/FEDS.2017.122

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