To define, Credit Insurance is an insurance policy associated with a specific loan or line of credit that pays back some or the entire amount owed should certain things happen to the borrower, such as death, disability, or unemployment. Like any other insurance policy, the costs, called a "premium" for the credit insurance are usually charged monthly by the insurer.
Credit insurance is not mandatory and it's illegal on the part of the lender to include it in the loan without the borrower's permission. The borrower has every right to say no to credit insurance. However, it's always good to have your payments insured in case of secured loans because you might end up loosing your home if you default on the payments of your secured loan.
When do you need credit insurance?
Secured loans generally require credit insurances. This is because the repayment period for such loans is generally long. It can stretch from 5 to 30 years. Ad anything unforeseen, unanticipated, unplanned and unfortunate can happen in this long period. So, to be on the safer side, borrowers opting for secured loans should go for credit insurance.
Credit insurance for secured loans can be of the following types:
Credit Life Insurance- In event of death, this insurance will pay off the whole or a major portion of your outstanding amount on secured loans.
Credit Disability Insurance- This covers accidents, illness and other injuries that might happen in the course of secured loans.
Involuntary unemployment Insurance- This will make the payments on your secured loan in case of job loss or business failure.
Credit Property Insurance- This is the most apt insurance cover for secured loans. It protects the property that is used to secure a loan in the case it is lost or destroyed.
It's said that protection is always better than cure. The same applies in case of secured loans. So, go for a protection cover in shape of credit insurance and play safe.
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