Default Insurance

Default insurance, often referred to as credit default insurance or credit default swaps, is a financial product designed to protect lenders or investors against the risk of a borrower failing to make their loan payments. Essentially, if a borrower defaults on their debt, the insurance provides compensation to the lender for their losses. This type of insurance plays a crucial role in enhancing financial stability, allowing lenders to manage risk more effectively and potentially encouraging lending by offering greater security against defaults.