Credit Insurance – Yes or No?

Credit Insurance - Yes or NoNowadays, there are not only healthcare insurance but loan insurance as well. In practice, credit institutions are extremely reluctant to provide loans without insurance. Therefore, there is a share of truth in the statement about the prerequisite – if you agree to take out insurance, the likelihood of approving an application for a loan increases significantly. Credit organizations are interested in reducing the risk of default on their money, so they make every effort for this. Indeed, in the event of an accident, loss of property or bankruptcy of the company, the prospects for the return of the loan become very fragile. The court will take the side of the borrower who has lost the ability to work, and in the event of his death, it will be quite problematic to collect debts from his heirs, provided that they generally enter the inheritance.

However, even if the bank approves the issuance of a loan without insurance, the terms and interest rate will differ significantly for the borrower. Therefore, when applying for loans in banks, borrowers most often buy insurance. The most common situations are mortgage, car and consumer loans. Moreover, when taking out a loan for the purchase of a vehicle or real estate, the borrower is obliged to insure the acquired property. You can only refuse to insure your life and work ability – in this case, as already noted, banks either refuse to lend, or offer an increased interest rate.

Payday loans are worth insuring

The situation is different with payday lending such as payday loans online Texas. MFIs deal with much smaller amounts, starting, at times, from several hundred dollar, which there is simply no point in insuring. However, some of MFIs offer fairly substantial amounts, up to several thousand dollars. But even a small amount that is not paid on time can cause you a lot of trouble.

After all, loans are most often taken for several days and return fairly quickly. As a result, the overpayment turns out to be very modest and the borrowers are sure that there is nothing to worry about. Meanwhile, this is a sad delusion, the victims of which were thousands of depositors who decided to live in debt now and were confident that they were able to foresee the future. $500, taken for a month, in case of delay, easily turn into several thousand dollars – that is, the maximum allowable amount established by law. Before regulatory laws were passed limiting the maximum amount of debt to four amounts of the initial loan, even small outstanding amounts grew to astronomical levels.

So, when returning from the store with a purchase, you may slip down or get into an accident. Being in the hospital and paying for expensive treatment, there will be no question of paying the loan back. The interest on the loan will grow fast, driving you deeper into the debt hole every day. Not to mention bad credit history and calls to your loved ones who are already worried about you. Therefore, in order to prevent such a situation, it makes sense to insure any amount, the “growth” of which can bring you problems.

As in the case of deposit insurance, before applying for a loan, you need to contact any insurance company, or agree on loan insurance directly with MFI employees: many payday organizations cooperate with insurance companies and loan insurance will take place automatically. The most common type of insurance when applying for a loan is “accident insurance”. In the event of an insured event, the insurance company assumes all obligations to repay the loan back. The cost of such insurance is only 2-3% of the amount.

Insured events

An insurance organization, like any other commercial organization, protects its interests and will carefully check whether an insured event has actually taken place, implying the fulfillment of the obligations specified in the agreement. The insured events include injuries resulting in temporary disability, hospitalization as a result of an accident, complete loss of ability to work, and death. In the latter case, the insurance company will save your heirs from debt obligations – after all, as you know, debts are inherited. True, only when the heir expresses a desire to enter the inheritance.

However, you should not try to cheat and avoid paying debts on the principle of false injury. Before paying your creditors the sum insured, the insurance company’s employees will carefully check whether you were really injured in an accident, and not in a drunken fight, for example. There are often controversial situations – for example, you get injured while in a store with dangerous goods – in this case you will have to present witnesses and prove that you did not intentionally drop the ax on your leg.

Category: General Information

Tags: bank credit, loan