If you have ever taken out any sort of loan such as a personal loan, commercial loan or a mortgage, the likelihood is that your borrower or financial institution mentioned some sort of loan insurance protection policy, and probably tried to sell you it. Most people however shy away from spending any more money or adding any more complication, as obtaining a loan in the first place can be a highly stressful and lengthy procedure. If people knew what it is and how it can help, there is a good chance more and more people would opt for loan insurance protection.
Loan insurance protection is an effective method a borrower can take towards protecting themselves against the monthly loan repayments if the borrower is unfortunate enough to be unable to work. If the borrower falls ill, suffers an accident or is made redundant which leaves them without a decent living, loan insurance protection will pay the monthly repayment amount for a specific period of time. The borrower is only covered for the amount of their monthly repayments and has to be taken out when the person is in full employment.
Without loan insurance protection, a person will struggle to live and pay their monthly loan repayments if they have no steady income. Income support benefits or job seekers allowance are very rarely enough or add up to the same amount as their previous wage. Defaulting on loan payments can lead to a whole host of problems including obtaining a bad credit rating, accumulating more and more debt as the months go on, in the worst case scenarios, especially in secured loans with collateral the property or asset used as collateral could be repossessed by the lender if the borrower is completely unable to pay any of the loan off.
Loan insurance protection can be expensive, the price you pay is dependant on numerous factors, for example how much of the loan repayment you would like to be protected against, up to 100%. Also the specific period of time you would like to be protected for and how much your monthly repayments add up to, your personal details such as age and health also affect the price of your policy. Some financial institutions are expensive when it comes to loan insurance protection policies, but the market has become very competitive so there are great deals available if you shop around and be patient.