Dreams, needs, and wants come as a part and parcel of every individual. If you are someone who relies on loans to fulfill your dreams, to tick off your bucket list then your real responsibility begins after taking the loan.
You can repay your loans till you are hale and hearty but have you ever wondered who would pay off your debt in case of any unforeseen event happening to your life?
To ensure your loan installments are paid on time, you need a backup plan to take care of your liabilities when you are not around. The solution to this is an Insurance Loan or a Loan Protector.
What is a Loan Protector or Loan Insurance?
Loan Insurance is a product designed to protect the person by covering their outstanding/unpaid loan amount as well as EMI payments in case of death, accident, or any mishap.
It protects the borrower from defaulting on loans by providing them with financial support whenever in need.
So how does this works?
The mechanism is similar to any other insurance. You can pay the insurance premium upfront with a lump sum amount or club it with the EMIs.
It comes as an additional rider, where you pay an extra percentage to get yourself covered. The premium for personal loan protection can vary from lender to lender. It is generally decided on factors like the size of the loan amount, age, health status, and tenure.
The benefits of the policy can be used to pay off personal loans, car loans, or credit cards.
The eligibility criteria of this insurance are –
1. The policyholder must be in the age bracket of 18-65 years.
2. To qualify, the purchaser often has to be employed at least 16 hours a week on a long-term contract or be self-employed for a specified period of time.
Types of Insurance Loan
There are different insurance schemes available in the market and some of them are the following –
1. Home Loan Protection Plan
2. Education Loan Protection Plan
3. Vehicle Loan Protection Plan
4. Personal Loan Protection plan
5. Business Loan Protection Plan
Who should go for loan insurance?
Loan insurance can be very helpful especially for –
1. Anyone who is the sole earning member of the family should take this insurance to protect his/her family from any future consequences.
2. Students planning to take an education loan in the future can go for this and secure their financial health.
3. Any other person taking any type of loan should not miss loan protection insurance.
Benefits of Loan Insurance
1. Provides coverage against any unpaid or outstanding amount under certain conditions (eg.- loss of job)
2. Ensures peace of mind that loved ones are protected from debt burden in your absence.
3. It helps in maintaining a good credit score by ensuring timely loan repayment.
Consider loan insurance as term insurance but for loans that are good to have as a shield but not something which you’ll want to use.
The main purpose of loan insurance is to act as a shield for your family by providing a financial cushion against any mishap.
The key is to do proper research and proceed only after carefully reviewing all the terms, conditions, and limitations.
There are a lot of factors that need to be considered before making any decision especially when it is related to your financial well-being; so, review all the aspects and see what is the right fit for you.