Credit cards, vehicle financing , personal loans and payroll loans are legal financial solutions for fulfilling personal desires and organizing your finances. But have you ever wondered how you would be able to pay the installments in case you get involved in an accident and hence not able to work? Loan insurance is used to close the debt or its amelioration in such a case.
I mean, none of us plans to have awful things happen to us, do we? The concept is that every single day brings its associated risks for each and every one of us. Getting financial protection insurance will help you be far safer and more secure in light of, for example, unexpected events like death, permanent or temporary incapacity, and involuntary unemployment
Are you interested in the subject and want to better understand what lending insurance is and how it works? Then continue reading, as we will explain everything about the subject.
How does credit life insurance work?
Also known as financial protection insurance , it guarantees the total or partial payment of some debts in case of unforeseen events that prevent you from fulfilling your obligations.
Think, for example, of a case of involuntary unemployment. You are unable to repay your debts if you have no income, right? Under loan insurance cover, your bills are compensated by the insurer for a period of time that is predetermined. Nice, huh?
Who can hire?
Anyone aged between 18 and 70 years old in perfect health and in full professional activity. However, as the lender is linked to some type of credit , to be entitled to protection, it is necessary to have a current contract for:
- vehicle financing: car, motorcycle or heavy vehicles;
- loan with vehicle as collateral;
- personal or payroll loan ;
- credit card.
Furthermore, as insurance protects the credit solution, there is a specific product for each of the modalities mentioned above.
What situations are covered by credit life insurance?
Credit life insurance often safeguards the financial solution in the event of the contractor’s demise, involuntary unemployment, or temporary or permanent disability.The terms of the contract determine the amount of compensation and the number of installments that are paid.We will go into further detail about each of these occurrences below. Just look!
Involuntary unemployment
Losing your job means losing your income. That makes it hard to meet your financial obligations, doesn’t it? With a loan insurance policy, you will have the guarantee of paying some installments on your loan, financing or credit card balance if you are fired without just cause and have been employed for 12 uninterrupted months with the same employer and have worked a minimum of 30 hours per week.
Total and temporary physical disability
For independent contractors and self-employed people, this coverage is intriguing. After all, the output of these individuals determines their income. If a worker suffers an accident that causes temporary disability, they will be left without income. Financial protection insurance pays some installments during the recovery period.
Total permanent disability due to accident
In the event of total and permanent disability — such as total loss of vision and disabling damage to the upper and lower limbs —, the insurance pays the outstanding balance up to the limit set out in the contract.
Natural or accidental death
Thinking about death is not pleasant at all, do you agree? But it is the natural course of life. So, it’s a good idea to prepare yourself so as not to leave your family members destitute and in debt. In this context, credit life insurance pays off the financing — up to the limit stipulated in the contract — and guarantees peace of mind for the heirs.
What are the advantages of financial protection insurance?
Taking out loan insurance is optional. However, protecting the credit solution you have taken out is legal because it guarantees security for your finances. Below, we have listed some reasons to take out loan insurance. Check it out!
Security in case of unforeseen events
Even the most organized person in the world is not free from the surprise factor. Unforeseen events happen to anyone, and credit life insurance guarantees the settlement or amortization of debts in the event of incidents.
Financing protection
Have you ever considered the possibility of losing your entire financing investment due to inability to make installment payments? Doesn’t it pain to even think about it? Just like car insurance , financial protection is a good way to protect your assets.
Preservation of assets
Imagine the death of a person paying a car loan. Do you know what would happen to the good in this situation? Either the heirs assume the debt, or they lose the vehicle to the finance company. But for those who have credit life insurance it is different. In this case, the insurance company pays the outstanding balance and the family members keep the asset already paid for.
Reduction of default risks
It doesn’t matter the reason: if you don’t pay your debts, you’ll have a bad name. It’s a painful situation that not only affects your physical and psychological well-being but also affects your financial life. Since the insurer assumes responsibility for loan installments, financing, or, in certain cases, the outstanding credit card debt, credit life insurance lowers the chance of default.
How to activate the loan insurance?
Firstly, you need to check the grace period. In the event of death, for example, insurance can generally be activated shortly after signing the contract.
However, when it comes to involuntary unemployment and temporary disability, it is common to have to wait a period of time for the coverage to take effect. So, remember to take a look at the contract to understand these points, okay?
After checking the details, are you sure the event is covered and the grace period has passed? So, there’s no mystery: just contact the insurance company to notify them about the incident. The process is very simple and similar to reporting a car accident . Just follow the insurance company’s guidelines and follow the process.
Lender insurance is a good way to protect your assets, avoid defaulting on payments and have more security in case of unforeseen events. And it’s really easy to sign up for, you know? The financial institution gives you the choice to pay for the insurance at the same time as soon as you obtain a certain sort of credit. Although enrollment is voluntary, accepting it will provide you with financial security and more peace of mind in your daily life.