DEFINITION of 'Debt Cancellation Contract'
A contract in which a bank agrees to cancel all or part of a customer's obligation to repay a loan due to an event such as death, disability or involuntary loss of employment. A debt cancellation contract is an alternative to a life insurance plan.
BREAKING DOWN 'Debt Cancellation Contract'
Debt cancellation contracts are a product that banks offer in lieu of credit insurance plans for credit cards and other forms of bank credit. Instead of credit insurance premiums, the customer pays the bank a fee.