What Is Loan Protection Insurance & What Are its basics?

Loan protection insurance is something that everyone should consider. It can provide you with financial support when the need arises.

You might be wondering:

What kind of need?

The need may arise anytime. For example, you get unemployed or are disabled, the loan protection insurance can prevent you from getting bankrupt. It helps you to cover the monthly default payments.

The interesting part?

Loan Protection insurance comes up with different names in different countries.

For example, in the US, it is usually called payment protection insurance (PPI), while in other countries such as Britain, various terms are used for this type of insurance such as unemployment insurance, redundancy insurance, premium protection insurance, and accident sickness insurance.

How Does It Work?

This type of loan is particularly useful for policyholders as it allows them to meet their monthly debts up to a predetermined amount.

The policies of the loan Protection insurance often change and offer short-term protection.

But listen!

These policies are only applicable to people with the age limit of 18-65. This age will be determined at the time policy is purchased.

In most cases, the purchaser has to fulfill another strict requirement, that is he must be employed at 16 hours a week and his contract should be long-term.

This brings up the question!

What if someone is self-employed? The policy remains the same so you should be self-employed for a specified time.

To give you a clearer idea, let’s have a look at the different types of loan Protection insurance policies.

Standard Policy:

This Policy says that the maximum coverage is 24 months and disregards the age, occupation, and smoking habits of the policyholder. Keep in mind that you will have to wait for the payment until the 60-day exclusion period.

period

In the US, this standard policy is applicable and is widely available through loan providers.

However, in some other parts of the world, the age-related policy is being used.

Age-related Policy:

This Policy is applicable in European countries, especially England. For age-related policy, the policyholder decides how much coverage he needs depending on his age. Unlike the standard policy, the maximum coverage for this policy is only 12 months.

What If The Policyholder Dies?

While choosing the insurance company, be very careful in the selection of the one whose loan Protection policy includes the death benefit. It will help to manage the situation when the policyholder dies or is unable to meet loan payments.

You can submit a claim if you are continuously unemployed from 30 to 90 days. You can start with the process in this period and the amount the coverage pays will depend on the insurance policy.

The Bottom Line

Every company has its own insurance policy, so before making an informed decision, do not forget to review the policy as it may contain various exclusions and clauses.

When you know all the loan Protection terms, exclusions and conditions, through the website of the insurer company or any other source, it becomes easier to decide the right company.

By the way, share your questions and thoughts in the comment section below