Ever find yourself in a situation where you took out a loan, but realised that you won’t be able to meet your repayments because of unforeseen circumstances. Loan protection insurance can come in handy when protecting you from such events. Here is what you need to know about loan protection insurance.
What is loan protection insurance?
You can think of loan protection insurance as an insurance policy that can create a financial buffer when you are faced with life's mishaps that are beyond your control. This type of insurance takes over any loan payment that you need to make but unable to because of:
- Falling seriously ill
- Becoming disabled
- Involuntarily become unemployed
It may not be a compulsory cover, but it can alleviate you from the emotional and financial stress of being able to pay off your loan on time.
How does it work?
A loan protection insurance policy can help pay off your monthly debts up to a predetermined amount. It can also help your loved ones clear off any payments on loans that you have taken in the event where you pass on. The premiums on this type of insurance will vary from lender to lender. For example, you can be insured for up to $1,000,000 to pay off your home loan when you die. You can get a payout of up to $7,500 on a monthly basis to cover if you are unable to work for 30 months due to serious and illness, and the same amount if you become involuntary unemployed that will keep you covered for up to 90 days. Speaking to your insurer and also checking the product disclosure statement can reveal what is covered for and what you are not covered.
Checking features to find a suitable cover
You will soon find that on your quest to find a loan protection insurance that not all are created equal. Therefore, it pays to check the policy features. Speaking to an insurer or broker can ensure that you find a policy that is suitable for you. It is also possible to take out a joint policy to increase the amount you are covered with your partner.
It is also advisable to compare policies across different insurers to find one that comes with a suitable premium and a payout that will adequately cover your expenses. Remember to choose a policy that will be able to work with your budget so that you can constantly meet repayments without defaulting as this can make your policy void.