Personal loan insurance

When you take out a personal loan one of the considerations you are not likely to be thinking about is what will happen if you should become jobless, seriously ill, or die and are unable to make payments on the loan. It is therefore important that you make some kind of arrangement to satisfy your loan repayment in case of these eventualities of which you have little or no control over. One option that is open to you is personal loan insurance.

What is personal loan insurance?

This kind of insurance is one where should you become unemployed, disabled, or die and are not able to keep up with the payments, you are protected. It is important to keep in mind that lenders expect all borrowers to make their regular loan payment irrespective of their status. Should the borrower die then the lender will claim against the borrowers’ estate. With personal loan insurance payments for the loan will be taken over by the insurer and made on your behalf until such time you are able to work again or in the case of your death until the terms of the insurance policy are satisfied.

Types

There are a number of different types of personal loan insurance. Three of the main types are:

Death Insurance. Here the insurance will take care of the loan amount up to a certain limit upon the death of the borrower. Depending on the assured amount on the policy it may actually cover the entire loan amount.

Disability coverage. This kind of policy will, up to a set limit, pay your monthly loan repayments and make payments to you to help with your disability.

Involuntary unemployment. These kinds of insurance are growing in popularity and will make your monthly payments on your loan in the event of you losing your job. The amount paid each month will however have a set limit.

Benefits

The main benefit with having personal loan insurance is that your monthly loan repayments will in part or in whole be paid should anything unforeseen happens to you and you are unable to make them. It also helps to protect you and your assets from and lender who would want to take action to recover the loan.

Risks

The main inherent risk lies in the fact that for you gain any benefit from the personal loan insurance you have to keep up with your premiums. If you should miss a payment chances are you will not have any coverage. There is also a time lapse before benefits kick in and with some lender this may be as much as ninety days. These kinds of policies do not take care of your expenses for a long time so at some time you will have to find yourself a source of income.

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