Protect yourself with insurance to cover your loans? - 2023-12-21
Protecting your loan and yourself is very important. Loan protection insurance can cover your loan and your line of credit payments or cover all or a portion of your loan balance if you are injured, become ill or pass away. Currently in the market you can have different types of loan protection insurance, including life insurance, critical illness and also disability. There is trade credit insurance to protect businesses when a customer fails to pay a trade debt.
Loan protection policies generally offer short-term protection, providing coverage around 12 to 24 months, depending on company policy. Benefits can be loan payoff, personal loan, line of credit, car loan or credit card. But this policy has age restrictions from 18 to 65 years and eligibility criteria's like must be employed at least 16 hours a week on a long term contract or be self-employed for a certain period of time.
Cost of the loan protection depends on the type of policy you select, standard or age related, and coverage. Loan protection can be expensive, if you have low credit history, then your payment can be substantially high.
The decision is all yours, but if you feel loan protection insurance is required then search for a discount insurance group that offers this kind of service. If you get it through financial institutions then the premium will tend to be higher, and they try to sell policies when a loan is taken out. You should buy the insurance separately, that will save you some money.
Obtaining insurance to cover your loans can be a prudent financial decision, as it can provide protection and financial security in the event of unexpected circumstances. There are several types of insurance that can be relevant to loan protection:
Credit Life Insurance: This type of insurance is designed to pay off a specific loan in the event of the borrower's death. If you have dependents or co-signers, this can help ensure that they are not burdened with the outstanding loan amount.
Credit Disability Insurance: This insurance covers loan payments if the borrower becomes disabled and is unable to work. The coverage typically applies for a specified period, during which the insurance will make the loan payments on behalf of the borrower.
Income Protection Insurance: Similar to credit disability insurance, income protection insurance provides coverage for a portion of the borrower's income in case of disability, ensuring they can still meet their financial obligations, including loan payments.
Loan Repayment Insurance: This is a broader type of insurance that may cover various circumstances, such as death, disability, job loss, or other specified events that could impact your ability to repay a loan.
Before purchasing any insurance, it's important to carefully review the terms, conditions, and coverage limitations. Consider factors such as the cost of the insurance, the coverage provided, and whether you may already have some level of protection through other means (such as employer benefits).
Here are some steps to consider:
Assess Your Needs: Evaluate your financial situation, dependents, and the nature of your loans to determine the type and amount of coverage you may need.
Shop Around: Different insurers may offer varying terms and premiums. Compare quotes from multiple sources to find the best coverage that fits your needs.
Read the Fine Print: Understand the terms and conditions of the insurance policy, including any exclusions or limitations.
Evaluate Existing Coverage: Check if you already have some form of loan protection through existing insurance policies or benefits provided by your employer.
Review and Update: Regularly review your insurance coverage to ensure it aligns with your current financial situation and needs.
Also keep in mind while getting a policy with mortgage, personal loan, or with any other loans, the lender can add the cost of insurance to the loan and charge interest on both, which can double the cost of borrowing. So get a policy that best suits your current situation and not what the lender promotes, or else you will end up paying more.