We are bombing with cash, mortgage and installment loans almost every day. We are also often eager to buy home electronics and household appliances in installments, not to mention vehicles or real estate, where purchasing without credit support would often be beyond our financial capabilities.
As of today, almost every bank that offers a cash loan attaches insurance to it. For some offers, we may opt-out of it, for others, it is a mandatory element. In many cases, if we use insurance, we can count on a lower interest rate on the loan, a lower commission or a margin.
The insurance protects the client’s life
Health or property interest (job loss or hospitalization). Such purchased insurance provides:
- First of all, safety and the ability to pay installments in the event of adverse fortuitous events;
- As well as convenience – insurance starts from the day following the conclusion of the loan agreement subject to payment of the premium;
- And the ability to tailor insurance to your needs – various insurance options available.
What does credit insurance give us?
Nowadays, each bank has a slightly different approach to credit insurance. Credit insurance is usually optional insurance. However, many banks require it, wanting to protect themselves against the insolvency of borrowers. It is usually a policy that may apply to insurance:
- for life;
- in case of illness or permanent disability;
- in the event of job loss;
- from the consequences of accidents.
The insurance contract stipulates that in the event of unforeseen fortuitous events resulting in an inability to work, the borrower receives funds that he can use to repay his debt at the bank. Depending on the contract with the bank and insurer and a fortuitous event, the money can be paid in a one-off form (the insurance amount is paid out) or in the form of the monthly payment by TU of funds to the bank, for the period specified in the contract.
How much does loan insurance cost?
Today, credit insurance is one of the most popular forms of securing its repayment. The insurance should be selected so that it meets the client’s needs as much as possible and protects his interests.
The amount of the protective premium also depends on the individual offers of banks and current rates in insurance companies. Some banks spread the cost of insurance into monthly installments, others collect the entire premium once in advance – by deducting its value from the loan paid to the borrower.
Credit insurance is usually expensive, but some borrowers appreciate this form of collateral, mainly because of the ease of its establishment and minimum formalities. The amount of credit insurance rates depends on many elements: the amount of the loan, its repayment date, the age and creditworthiness of the customer, and above all – the scope of protection chosen. Before deciding to buy insurance, it is definitely worth paying attention to:
- Its cost – the first issue is the cost of credit insurance, which in most cases is given as a monthly percentage rate calculated on the loan amount, and its value ranges from 0.05%. to 0.7, or even a few percents. When choosing more expensive insurance, it is worth paying attention to whether insurance coverage is actually wider;
- Scope (i.e. what risks are covered by insurance) – the scope of credit insurance is determined individually by the banks. There are several main areas to mention, including life insurance, loan installment insurance until the mortgage is established, job loss insurance, and property insurance. Of course, the wider the coverage, the better, but unfortunately you have to take into account a higher fee per month;
- Benefits and exclusion list – this is a description of what we will get from the insurer as a result of the protected event. It’s worth knowing what exactly we are entitled to.