Over the course of a lifetime, unforeseen events can occur and lead to a difficult financial situation. Consequently, it can be more difficult to meet its financial commitments, especially in terms of monthly loan payments. This situation may seem inconceivable to some, but no one is immune. For this reason, borrower insurance represents an adequate solution that protects policyholders as well as lending institutions.
What should I know about borrower insurance?
This is insurance designed specifically to cover the monthly repayments of a loan when the borrower (for one reason or another) is forced to interrupt the payment of his credit. Unforeseen situations can arise at any time, so you have to plan ahead and consider borrower insurance with ferrets. Such coverage makes it possible to repay the loans and thus protect the insured from any default in payment of their monthly payments.
Borrower insurance allows the risk of non-payment to be transferred to a third party (the insurance company). It should be noted that there are two types of coverage to ensure credit. The insurance offered by banks and lending institutions, called collective insurance or group insurance. This is the coverage favored by borrowers, since it is very good coverage at a very advantageous price.
The second type of coverage is the delegation of borrower insurance. When the borrower refuses to insure his loan with a lending institution, he can choose any insurance company that offers him an individual insurance contract.
What does borrower insurance cover?
It is clear that the subscription of a borrower’s insurance makes it possible to guarantee to the insured the payment of his credits in the event of insolvency. In this sense, it is worth highlighting the guarantees included in such insurance and what they cover:
1- Death
As its name suggests, this guarantee makes it possible to reimburse all of the capital remaining due in the event of the death of the borrower. There death benefit is often required by banks and lending institutions. The family of the deceased borrower will also be protected and will not have to bear such a financial burden. However, it should be noted that insurers impose certain conditions. These include the reason for death which must not be following the exercise of an extreme sport, suicide, etc.
2- Disability
This is a guarantee that covers the monthly payments of a loan in the event of the insured person’s disability. In other words, if the borrower is unable to perform a gainful activity, following an accident or serious illness. Total permanent disability or IPT is a guarantee that makes it possible to repay the entire loan provided that the insured proves that he receives no income and that he no longer has a salary in order to finance his loan. .
The degree of invalidity must be evaluated at more than 66%. With partial permanent disability (rate between 33% and 66%), the insurance will only reimburse part of the loan, since the borrower is able to carry out an activity more suited to his condition.
3- Temporary incapacity for work
The ITT guarantee is therefore very useful in the event of temporary disability. Indeed, following an accident or illness, the borrower’s insurance covers the reimbursement of the monthly payments during the period of disability (without exceeding 4 months) of the insured. The latter must pay the monthly installments of his loan as soon as he recovers.
4- Unemployment or job loss
The unemployment guarantee makes it possible to repay part of the loan when the borrower loses his job, while waiting for the insured to find a job. This is one of the guarantees that are generally required by banks and lending institutions to grant credit.
Finally, it is easy to see that borrower insurance is essential in some cases, and in others, it can offer many advantages that must always be taken into account.
