If you are unable to repay your loans due to an unexpected calamity, that is, due to illness, injury, sudden death, there is no need to worry about it. Personal loan insurance or personal loan protection insurance will help you cover up the costs in such cases. There are five important things about any personal loan insurance policy, which we would be discussing below.
What is Personal Loan Insurance?
The personal loan protection insurance plan is helpful in future as it does not let the pressure of clearing the dues on your relatives or family. When you are unable to maintain your consistent earning capacity due to any kind of issue, may it be personal or health or employment, the protection cover will take care of the outstanding amount.
What Is The Extent of The Coverage?
Personal Loan protection insurance depends on the policy the person has selected and also, the person’s personal circumstances. It may provide cover for –
- Serious illness or accidental injury: If the person becomes injured or ill due to any reason whatsoever and is unable to work then depending upon the person’s policy, he or she is entitled to claim financial assistance to meet his or her loan repayments. This is until the loan is paid off completely for a certain period of time and the person is back on his feet again. The person must check the policy to find out if there is a waiting period involved from the commencement of the illness to when they can claim
- Spontaneous Unemployment: If the person does not have a job then he or she will be able to claim assistance on his loan repayments. But first, he must check with the loan provider for the details of the cover and check whether there are exclusions around seasonal or contract work
- Certain Death: If the person concerned passes away unexpectedly, the personal loan insurance covers that scenario too. One must check policy details like exclusions around pre-existing conditions and suicide as well as the maximum payout amount available
Personal loan insurance cover protects you from unexpected financial crunches. [Source: Turtlemint blog]
What is not included?
A person should be acquainted with the various exclusions depending on the policy of a personal loan protection insurance, which includes
- Contract-based employment or seasonal employment
- Medical issues that do not permit a person to work
- Not being able to cope up with the assigned working hours
- Injury that is somehow caused due to oneself
- Retirement from the job
- Sudden sickness that takes away your life within a very few days from the commencement of the newly joined job
Although in general, the minimum age for application of a loan should be 21 years and the upper age limit is till 65 years, this is completely variable from bank to bank. To qualify this type of insurance, you may be asked by some providers to meet the eligibility criteria strictly.
What is the cost of a personal insurance protection plan?
There are a lot of factors based on which premiums for known protection are planned. Some of them are –
- Cover type and requisites chosen by you: The cost of an accident, illness, life, unemployment will differ amongst them. The cost will also get influenced by the requisites chosen for each cover type.
- The amount of loan taken and its duration: The total premium will be based on the amount of loan you take and the term of the loan.
- The type of policy: Whether it is a single policy or a joint policy, each option will be costing a different amount by some of the providers.
- The size of repayment: The amount of money which you pay per month in EMIs will also contribute to the total premium. Thus, it will vary based on your repayment size.
- Age factor: Your age at the commencement of the policy will also be considered at the time of evaluation of your premium amount. Consequently, you need to check this out with your loan provider.
What is the need for a loan insurance plan?
A loan can be a blessing as well a curse if not handled properly. You may be thankful for a loan at times of your financial need. On the other hand, if not repaid at the stipulated time, due to certain unforeseen situations as in death, it can be a serious burden for your family. However, there is no need to worry about it as some banks themselves tie-up with the insurance companies to rid you off from your unexpected calamity.
It is not mandatory to opt for personal loan insurance but there may also be some situations where the bank may sell the insurance loans to you by themselves. For instance, if you have a greater life insurance loan, you commendably should not opt for personal loan insurance.
Personal loan insurance protection plan is important to be taken in consideration as due to any kind of issue if you are not able to clear the outstanding amount, the burden will not be completely transferred to your family or relatives.