Loan protection insurance is a policy that helps policyholders access financial support in the event they fall ill, unemployed, or disabled. The insurance protects the insured from default by paying for the monthly loan payments. Loan protection insurance terms differ from one insurance company to another and also from one region to another. In the United States, for example, the cover is known as payment protection insurance (PPI) and is usually tied to a particular loan, e.g., car loan, personal loan or home loan. In Britain however, the policy is called an accident sickness insurance, redundancy insurance or unemployment insurance.
How Loan Protection Insurance Compares with PPI
Loan protection insurance is more flexible than the payment protection insurance as the monthly benefits are paid directly to the policyholder. As such, he can use the money to pay off other debts like credit card debts or mortgage payments. Additionally, the amount covered by the loan protection insurance can be as high as 70% of your gross earnings and can be customized to suit the policy holder’s needs.
Why You Need Loan Protection Insurance
Unfortunate life situations like illness, disability, redundancy, unemployment are often unpredictable. They leave you unable to work for extended periods leading to defaults on Northcash Online Loans. A loan protection policy protects you from default as you get to pay off the required monthly amounts based on the plan you select. The insurance also helps the policyholder to maintain a good credit score as he keeps-up-to-date with the loan payments.
Types of Loan Protection Insurance
The policy is designed to meet the insured’s monthly debts up to a predetermined amount. There are various types of loan protection insurance:
This kind provides monthly payments for 12-24 months based on the insurance company. It offers financial support as a result of an accident, involuntary redundancy or illness. Since it lasts for a shorter period, it is more affordable than the long-term loan protection insurance.
The policy covers a longer period than the short-term protection policy as it can last until retirement age. It takes care of loan payments as a result of the insured’s sickness and accidents but does not cover unemployment caused by involuntary redundancy.
This kind does not factor in the holder’s occupation, age, gender or smoking habits. In fact, the policyholder determines the amount he wants the policy to cover. Standard policies are usually available via loan provider and do not make payment until after the initial sixty-day exclusion period. It has a maximum coverage of twenty-four months.
The cost for this policy is determined by the amount the policyholder wants to be covered and his age. The coverage lasts twelve months.
The value depends on the type of policy you are taking, the amount covered and where you live. You may purchase the plan separately at a later date which is way cheaper than buying the insurance along with the mortgage, loan or credit card. It is because lender includes the cost of the insurance to the loan and interest on both amounts. Discount insurance groups provide lower rates for this service.
Loan protection insurance makes an essential investment for people who have taken out loans. You don’t want your house, car or other asset auctioned as a result of defaulting loan repayments.