Loan Insurance

Owner: a strong recommendation

Loan protection insurance, like any other type of insurance, keeps you and your family safe during challenging times. It helps you repay loans when unforeseen events, such as job loss, a sudden death, or an accident, occur.

How Does Loan Protection Insurance Work?

Loan protection insurance can help policyholders meet their monthly debts up to a predetermined amount. These policies offer short-term protection, providing coverage generally from 12 to 24 months, depending on the insurance company and policy. The benefits of the policy can be used to pay off personal loans, car loans, or credit cards.

What Are the Costs?

The cost of payment protection insurance depends on where you live, the type of policy you select, whether it is standard or age-related, and how much coverage you would like to have. Loan protection insurance can be very expensive..

United States Accountability Office. "Credit Cards, Consumer Costs for Debt Protection Products Can Be Substantial Relative to Benefits but Are Not a Focus of Regulatory Oversight

If you have a poor credit history, you might end up paying an even higher premium for coverage.

If you think this type of insurance is something you need, consider looking for a discount insurance group that offers this service. Premiums through large banks and lenders are generally higher than independent brokers, and the vast majority of policies are sold when a loan is taken out. You have the option to buy the insurance separately at a later date, which can save you hundreds of dollars.

When buying a policy with a mortgage, credit card, or any other type of loan, a lender can add the cost of the insurance to the loan and then charge interest on both, which could potentially double the cost of borrowing. Get the policy that best applies to your needs and current situation; otherwise, you could end up paying more than you have to.

Pros and Cons of Having Loan Protection

Depending on how well you research the different policies, having a loan protection policy can pay off when you select a policy that is inexpensive and will provide coverage suitable for you.