What is Personal Loan Insurance?
Until recently, loan insurance was a concept that was only available for real estate loans. However, it has now also become available in other forms of credit, including personal loan and payroll deductible loans.
A personal loan protection insurance helps cover the inability to repay the loan due to unfortunate circumstances such as sudden death, unemployment or due to health conditions.
The responsibility for repaying the personal loan will not be borne by the dependents or their family. You can choose to pay the premium along with your loan payments monthly. You can also pay the premium in advance.
Now that you know what a loan insurance is, here are some factors you need to consider before you apply for one.
Check your financial condition
Is paying for a credit or personal loan insurance an extra expense? Not always. In some cases it is necessary to evaluate if you are financially comfortable to pay the additional amount along with the installments of the loan you want to take.
Taking out insurance can rather avoid unfavorable setbacks, so try to find a place in your finances, either to pay in installments or in cash. One way or another, while bringing more security to you and your family, makes the process of applying for money funded more expensive – but, it’s worth it!
Is not it mandatory to take out the insurance?
Loan insurance is not mandatory for personal loan takers, bank loans and other lines of loans. There may be situations where the bank can sell it to you separately. However, it is up to you whether you include it or not.
For example, personal loan insurance is not helpful if you have a significantly higher amount of life insurance coverage or other types of insurance that support claims that the loan insurance covers.
It is worth mentioning that some types of loan, this option to opt does not exist, meaning the insurance is already built into the value of the installments regardless of whether you want it or not, this is the case of payroll loan, real estate loan, and other modalities for companies and microcredit.
Loan Insurance Coverage
Coverage is something that differs between insurers and administrators, each one has its own policies, terms and deadlines, however, some aspects are the same for the most part, below you will get a rough idea of what it would look like:
- Death Coverage : up to 200% of the initial balance of your loan, coverage limited to $ 100,000.00.
- Involuntary Unemployment : up to 12 installments of up to R $ 1,000.00 (each) (grace period: 31 days and deductible: 31 days).
Eligibility : Insured persons who, at the time of termination, have an employment relationship (CLT) of at least 12 (twelve) consecutive months with the same employer.
- Total and Temporary Physical Disability (IFTT) : up to 12 installments of up to R $ 1,000.00 (each) (grace period: 31 days and deductible: 15 days), due to an accident or illness that prevents you from carrying out any work activity, except as a result of Excluded Risks and in compliance with the provisions of this Coverage and those contained in the General Conditions.
Eligibility : liberal or autonomous professional in professional activity, who has an accounting / tax document proving the activity performed.
Compare Different Personal Loan Insurance Deals
Often a personal loan insurance will look like a married sale when the manager or bank system informs about this option. However, this can become a problem, since when comparing, this cost is not informed at the initial interest rate which may impair your analysis of which lender has the best offer.
Credit offers differ from company to company, this we all know, however, you need to be aware of the additional pricing. Therefore, it is necessary to make a comparison of offers in different creditors based on the CET.
In addition, there are many loan insurance coverages that do not cover situations like job loss. On the other hand, if you are a liberal or autonomous professional, you will not be able to benefit from it.
Know Your Personal Loan Insurance
It is advisable to know all the terms of service offered before opting for a loan insurance. This will help avoid situations where you can not claim insurance.
It is important to also say that you are not required to make the insurance that the banks or lender offer you as a consumer, you have the full right to compare in an insurance insurer that best suit your customer and financial profile, of course!
Check terms in case of anticipation
In most cases, when you close down (a loan in advance) before the deadline, you are likely to lose the insurance benefits associated with it. Therefore, you should know if there will be a refund of the amount paid or if it will be canceled.
If you have paid the value of the insurance in cash, you will certainly have amounts to be repaid if you repay the loan before the deadline, please note that when you install, it has been diluted for the entire period, if there is no refund
Taking out insurance for your personal loan is always a good option as long as you do the full homework on the terms and conditions of the service offered.
To guide your choice, we have done a personal loan interest rate check from partner lenders and other banks for you to get an idea.