Loan Insurance

Getting a personal loan has become simpler for salaried persons, self-employed individuals, and retired pensioners. However, before seeking a loan, you must assess if you really need it. Firstly, they come with high-interest rates, and secondly, you could also end up losing your collateral. Moreover, unforeseen issues such as temporary disability, sudden job loss, or the accidental death of the borrower can put you in a pickle. Paying the monthly instalments can become difficult. That’s exactly where personal loan protection insurance plans come into the picture.

 

Be it a personal loan or a home loan, seeking additional support via a loan insurance policy can help you pay off your monthly EMIs during unfortunate circumstances. Banks and NBFCs in India offer loan insurance schemes to assist you in repaying your car loans, personal loans, and home loans on time, irrespective of your financial condition.

Features and Benefits of Personal Loan Insurance

A lot of banks in India provide an extended service with personal loans and offer a loan protection plan. However, you have the option of rejecting this value-added service. Before you accept/reject or buy a separate loan cover insurance plan, it is essential to understand its advantages. So, let us explore the features and benefits of personal loan insurance:

 

• During unfortunate events such as accidental death, job loss, or temporary disability of the borrower, loan insurance policies reduce the outstanding loan amount, and secure their loan repayments.

• The borrower’s family won’t feel burdened with the sudden responsibility of paying the monthly EMI.

• Some loan insurance plans even offer tax deductions under Section 80C of the Income Tax Act, 1961.

• A lot of insurers have loan insurance policies with a money-back feature, where the insured or the borrower receives a certain amount at the end of the plan.

Premium Amount for Personal Loan Insurance Plans

Like other insurance policies, the borrower needs to pay a premium amount against the loan insurance plan. This premium amount depends on the loan amount, bank's regulations, borrower's age, physical health, and loan tenor. The following table highlights some of the factors on which the premium amount of personal loan insurance plans varies:

Factors to Consider While Choosing a Loan Insurance Plan

There are many essential factors that you should consider when opting for an insurance plan for a personal loan. The major ones among them are

 

• A loan insurance plan must cover all causes of death and not just accidental deaths.

• It must include coverage against both permanent and temporary disability.

• The loan protection insurance plan must cater to borrowers with higher loan amounts.

• Go for a plan that allows monthly premium instalments or a single lump-sum payment as per your requirements.

Types of Personal Loan Insurance Policies

Here are the two important types of personal loan insurance plans:

• Single and Regular Premium Reducing Cover

Under this plan, your premium rate decreases as the outstanding loan amount goes down during the loan tenor.

• Single and Regular Premium Level Cover

Here, the premium rate remains unchanged even if the outstanding loan amount decreases.

Banks offering Personal Accident cover for Personal Loans

The following banks offer free personal accident covers with their loans like:

 

• HDFC Bank offers personal loans with a free personal accident cover of up to ₹8 Lakh, and a critical illness cover of ₹1 Lakh.

• IDBI Bank also provides a free personal accident cover with its loans.

• ICICI Bank offers the All Safe Insurance Plan to insure the borrower’s loan.

To Conclude

Not every loan borrower needs a loan insurance scheme. The lender or the bank might try to sell insurance plans along with your personal loan, however, the final call has to be taken by you. If you feel you don’t need it, you can simply opt out of it. At Bajaj Markets, we offer a range of pocket insurance plans that keep your finances protected against various health, travel, and lifestyle emergencies. So, go ahead and browse through our policies now!