This type of financial commitment usually does not entail an obligation to take out additional insurance. However, there are banks that require this from borrowers. Their main purpose is to care for their own interests. What’s more, this insurance can be beneficial for all parties signing a cash loan agreement. First of all, it secures the bank against loss of financial liquidity, and secondly it is helpful in case of a fortuitous event that prevents further repayment of loan installments on the borrower’s side.
What does insurance cover?
The borrower may sign an insurance contract in the event of:
– permanent disability
– job loss
– incapacity to work
Each of the aforementioned circumstances may cause problems with the settlement of credit obligations, and thus increasing debt. To be able to pay the insurance, certain conditions must be met. They are usually specified in the insurance contract. Thus, not every illness brings with it a chance to get support from the insurer. The situation is similar in the case of job loss. Usually, the cause of it counts and which party has terminated the contract.
Death of the borrower and loan insurance
What is the situation of loan insurance in the event of death ? Such insurance can be bought not only for mortgage loans, but also for consumer loans. Thanks to such insurance, in the event of the borrower’s death, the insurer repays the remaining part of the loan together with any interest. As the closest to the borrower’s family, we do not have to worry about repayment of the loan that remains to be repaid, because it is the insurer’s responsibility to repay it. The bank or family of the person who had the loan sought should submit a special request to the insurer as soon as possible along with additional documents, such as a death certificate.
When the bank sets the conditions
It happens that the bank tries to persuade borrowers to sign an insurance contract, applying a lower interest rate or a smaller loan margin for insurance holders. Then the other party should carefully recalculate the profitability of such a solution. Another situation is too low own contribution of the person applying for financial assistance. It is the own contribution that is a security. If it is not there or is too small, the bank takes on a greater risk. Then he will apply high interest rates, demand a surety or insurance.