CONSUMER CREDIT INSURANCE IN NEBRASKA*

Abstract

SINCE WORLD WAR II, there has been a very rapid increase in the use of life and disability insurance in connection with credit transactions. This special type of called consumer credit insurance, names the credit-granting institution as the first beneficiary and provides that an insured person's debt will be paid in full if he should die or that periodic instalments will be paid if he should become disabled. It is divided, thus, into two major categories: credit life insurance and credit accident and health insurance. Credit granters can make the insurance available to their customers by offering individual policies or by offering certificates of insurance under a group policy. In either case the insurance is issued without benefit of a medical examination, with no restrictions for physical impairments or occupational hazards and with a uniform charge regardless of the debtor's age. Individual credit life insurance policies were first writen in 1917 for the benefit of loan customers of Morris Plan banks. Group policies were introduced in 1926, and accident and health coverage was developed in the late 1930's. The amount of credit insurance in force increased vastly following World War II, and it is now written by more than 350 insurance companies. Its recent growth is attributed to the increased use of credit, the benefits provided by the the number and variety of creditors offering it, the public's desire for security, and the enactment of favorable state legislation. In Nebraska, credit insurance is made available by virtually all finance companies, industrial loan and investment companies, sales finance companies, and credit unions. It is also offered by most banks and by a few retail stores. There are many indications that the majority of consumers desire to protect their debts with credit insurance. It was found, through a mail survey conducted among 1,000 Nebraska residents, that 53 per cent of those who had no experience with the insurance and 95 per cent of those who had would choose to purchase credit insurance in connection with a future debt.