Debtor Groups: Credit Disability and Mortgage Insurance

A creditor may hold a group policy insuring its debtors against loss of time from bodily injury or illness tied to a specific loan or credit transaction — the creditor is the policyholder. Two forms: Credit disability insurance covers all debtors of a creditor (including debtors of commonly controlled subsidiaries/affiliates) and may be issued only if the group receives — or reasonably expects in the first policy year — at least 100 new entrants yearly; the insurer may require evidence of insurability if fewer than 75% of new entrants become insured. Mortgage insurance covers a creditor's debtors whose indebtedness exceeds ten (10) years and is secured by a first real estate mortgage.

The bank insures its borrowers' paychecks: everyday loans need 100 fresh borrowers a year; mortgages qualify when they're 10+ year first liens.