Loan insurance is a profitable repayment guarantee for the borrower and the lending institution. Subscription to a borrower insurance is strongly recommended for long-term loans such as consumer credit or mortgage loan. This type of insurance is optional, however, borrowers have every interest in subscribing to have a good record.
Why is it important to subscribe to a borrower insurance?
When a long-term credit, which is a real estate loan or a consumer credit without proof, is reduced to protect his family, the borrower is asked to subscribe to a credit insurance.This insurance is a guarantee which, in the event of an unavoidable situation that makes the borrower unable to repay his debts, consists in having the loans reimbursed by an insurance company. It is important to know that in case of disability or death of the borrower, the repayment of the loans will be automatically assigned to his heirs. Thus, if you want to protect your loved ones from unfortunate situations, it is preferable to contract at the same time as the signing of the loan contract a borrower insurance or credit insurance.
Understand what consumer credit insurance is
A consumer credit insurance is an insurance contract signed during the contraction of a consumer loan. This insurance ends once the entire loan and interest is paid. This is a guarantee that ensures the payment of the credit in case of disability or death of the borrower. The insurer can subscribe directly to an insurance contract with its lending bank or from another insurance company as it chooses. The risks covered by credit insurance include death, illness or serious accidents that have led to physical disability, but also the loss of employment that can result to unemployment.
Calculate a credit insurance premium
There are two different ways to calculate the insurance premium, including the calculation of the amount borrowed, and the interest rate increase. The first method is based on the amount borrowed and the insurance rate is usually 0.3% per year. As for the interest rate increase has a decreasing trend, calculated on the remaining debt to be repaid.
How to terminate a consumer credit insurance?
Credit insurance generally ends once the entire loan is repaid, but can also be terminated each year upon the arrival of the policy’s anniversary date. The subscriber may apply for cancellation of the contract by registered mail two months before the arrival of the contraction date. This letter must expressly mention the decisions taken by the client, if he wishes to carry out a new insurance contract or completely stop everything.