Protecting Your Finances: The Role of Personal Loan Insurance

The way a personal loan acts like a safety net during any kind of unexpected expenses, personal loan insurance acts like a safety net in case you’re unable to repay the loan due to any emergency like job loss, accident, medical issues, or even death. This is why taking a loan protection plan is always a better choice.

What is Personal Loan Insurance?

Personal loan insurance is insurance for your outstanding amount in the case of non-payment due to any unexpected events like medical emergencies, job loss, temporary disability etc.

While non-payment of a loan usually leads to penalty charges, negative impact on your credit score, recovery calls and even legal action, taking personal loan insurance can even safeguard you from such consequences.

Types of Personal Loan Insurance Policies

These are the types of personal loan protection insurance policies that you should be aware of:

1) Single and Regular Premium Reducing Cover:

In this, the premium reduces according to your outstanding loan amount throughout the repayment period.

2) Single and Regular Premium Level Cover:

In this, the premium remains the same throughout your repayment period.

How do Loan Protection Insurance Policies Work?

Different lenders offer different loan protection policies. And just like any insurance policy, you have to pay a premium to get personal loan insurance. You can pay the lumpsum amount of the premium before taking the loan and also repay it with your personal loan EMI.

This depends on many factors like your credit profile, repayment history, loan amount and selected personal loan repayment tenure.

Pros and Cons of Loan Protection Plan

1) Pros

Your Repayments will be Taken Care of in Case of Any Unfortunate Circumstances:

If you have any ongoing loan but are unable to repay it because of any emergency, then your insurance against the loan will act as a saviour for you. This will also protect your credit score and personal loan eligibility.

Your Family or You will Not Be Burdened:

The negative consequences of missing your repayments can be distressing, especially when you’re already going through an emergency. During such times, loan protection insurance can protect your family and you from any kind of financial burden.

Also Read: Consequences of missing your EMIs

2) Cons

– You will Have to Pay a Premium.

Like any other insurance policy, you will have to pay a premium. This can increase your overall charge of taking a personal loan.

It Doesn’t Affect or Reduce the Loan Interest Rate:

While it is often believed that taking personal loan protection insurance can reduce the loan interest rate on it, that’s not the case. The interest rate you’re offered on your personal loans depends on factors like your credit score, repayment history and the capacity of your lender. Your loan protection plan has no impact on the personal loan interest rate.

Is it Necessary to Get Personal Loan Insurance?

While you don’t have to get personal loan insurance, it’s always a good idea to be ready for any unexpected events, just in case.

In fact, many lenders offer a very affordable premium on personal loans, so you don’t have to pay a very heavy price to stay protected from any negative consequences.

Features and Benefits of Taking Loan Protection Insurance

Here are the features and benefits of personal loan insurance that you should be aware of:

· You have to pay a premium to get access to loan protection insurance.

· It covers your total outstanding amount if you’re unable to repay it because of any emergency.

· It can cover a wide range of unexpected events like job loss, medical conditions, temporary disability or even death.

· With personal loan insurance, you will always have peace of mind and a sense of financial security.

Also Read: What is a Personal Loan? Definition, Types & How Do They Work?

Here are some things to consider before taking personal loan insurance:

· Check the premium amount being offered by your lender.

· It’s important to go through all the terms like the coverage period, what circumstances the insurance covers, etc.

· Depending on your lender, you may have to complete a mandatory medical examination to get a loan with insurance.

· Understand the type of personal loan insurance the lender is offering.

Also Read: Medical Emergency Loan

Conclusion

It’s always a good idea to be prepared for any kind of possibility or unexpected events. And while a personal loan can prepare you for times when you’re in need of cash, personal loan insurance can protect you when you’re unable to repay the loan.