Throughout life, it’s always a good idea to start thinking about insurance. Life insurance, auto insurance, home insurance, whatever this type of insurance, it is better to consider it when you are young to benefit later. In this article, we will inform you about the borrower insurance and its usefulness.
Summary of the page
- 1 Why take out a borrower insurance?
- 2 Where to find a borrower insurance?
- 3 What insurance coverage to take?
- 3.1 Health cover
- 3.2 Disability coverage
- 3.3 Death cover
Why take a loan insurance?
Credit insurance, also known as “borrower insurance”, can be used to repay the balance of a loan in the event of illness, accident, disability or death. So, if you die or become unable to work because of one of these circumstances, your insurance company will cover what you owe to your lenders or creditors. However, it is important to know that loan insurance varies from one loan to another, which means that you must purchase a separate insurance policy for each loan. The terms of a home loan insurance policy will be different from those you will receive, for example, from auto loan insurance. (You’ll find out more about home loans on the DMC Finance blog ).
Where to find a borrower insurance?
As a general rule, you can obtain legitimate insurance for your loans and lines of credit through insurance companies, insurance brokers and lenders themselves (including banks and traditional financial institutions). Since loan or credit insurance is not always an obligation, you must give the supplier verbal, written or electronic consent, if you wish, to receive a policy.
What insurance cover to take?
In general, there are three borrower insurance covers.
This will cover the rest of your loan payments in the event of critical illness preventing you from working. The complete list of covered diseases will be specified in the terms of your insurance policy. However, there are several specific diseases that are not usually covered if you have them before you can take out insurance.
Disability coverage, on the other hand, does not necessarily cover the full cost of your loans and credit bills. Instead, the minimum balance of each payment will be covered in the event of a sudden illness or accident that physically disables you and prevents you from earning income. This policy will only last for a period of time and once the coverage period is over or you fully recover from your disability, you will be responsible for the remaining balances on your line of credit . As with other forms of insurance, your ability to be eligible will vary depending on the conditions set by the insurance provider.
In the event of death of the insured borrower, the insurance provider will use a portion or the total value of the “death benefit” to pay the remaining balance of their loan or credit product. It is very important to note here that your family or beneficiaries will not receive the entire death benefit if your loan has not been repaid at the time of your death.