In the event of an unexpected death or permanent complete disability, loan insurance provides protection on outstanding loans up to the sum insured for loan protection. It is in addition to the standard cover insured.
A Loan Protector cover for EMI protection can be a helpful tool to keep your credit score unaffected in case of financial constraints.
Loan insurance benefits in cases of:
- Job loss
Factors to consider before choosing a loan insurance
Coverage: The primary purpose of loan insurance is to safeguard you against loan defaults. Therefore, while planning to get loan insurance, you should carefully compare coverage provided under different plans. You should look for a plan that is cost-effective and offers maximum protection.
Types of Loans: A loan protection plan should be chosen, depending on the types of loan liabilities you have in your portfolio.
Effects on Premium: When you take loan insurance, the associated cost is added to the loan amount, and the net effect influences your equated monthly instalments. Therefore, the overall impact of loan insurance should be considered.
Scheme Fine Prints: It is imperative to understand loan particulars before choosing loan insurance. Thorough scrutiny and analysis of the terms and conditions in the loan document help you determine if a particular policy is right for you.
Loan insurance comes at an add-on cost. However, it provides you financial protection and does not increase your applicable interest rate or financial liability. Just like term insurance, the loan cover remains applicable until the loan remains active. As and when the loan is repaid, the loan insurance gets exhausted. Details about the applicability of insurance and the amount of coverage are decided when the loan agreement is executed.
Is loan insurance a rational choice?
Loan insurance protects any specific loan that you have taken. The rationale behind opting for loan insurance is two-fold:
- Financial Protection: When you or your loved ones already have a crisis at hand, standing loans adds to the financial burden. Loan insurance provides you protection against any such liabilities. Besides protecting you, the policy also offers cover to your loved ones in case of your sudden demise.
- CIBIL Score: CIBIL score is an indicator of your financial health, and maintaining it is very important. Loan insurance helps you maintain your CIBIL score through payment of EMIs when you are unable to do so.
The bigger the loan, the greater is the necessity to get loan insurance. It is also imperative to go through all the terms and conditions thoroughly. Review all exclusions and clauses before committing yourself to an insurance.