Is Loan Protection Insurance Right for You?

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., a car loan, personal loan, or home loan.

How Loan Protection Insurance Compares with PPI

Loan protection insurance is more flexible than 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 policyholder’s needs.

Why You Need Loan Protection Insurance

Unfortunate life situations like illness, disability, redundancy, and 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.

However, despite having loan protection insurance, there could be instances where you still find yourself in a difficult situation, and your car or other financed asset faces repossession. For example, if there is a dispute with the insurance company regarding the coverage or if the insurance company denies your claim, you may need to hire a repossession attorney to protect your rights and interests. Regardless, circumstances such as these are rare and if you have loan protection insurance, you won’t be in the wrong and would be entitled to compensation.

Now, when it comes to picking the right type of loan protection insurance, there are a few different ones to choose from:

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:

• Short-term Protection

Your boss might have received some redundancy advice, due to which he would need to possibly fire you. In a situation like that, short-term protection can provide monthly payments for 12-24 months based on the insurance company. It offers financial support as a result of involuntary redundancy, even an accident or illness. Since it lasts for a shorter period, it is more affordable than long-term loan protection insurance.

• Long-term Protection

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.

• Standard Policy

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.

• Age-related Policy

The cost for this policy is determined by the amount the policyholder wants to be covered and his age. The coverage lasts twelve months.

• Cost of the Policy

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.