Why do you need personal loan insurance?

Personal loans are very popular, and there is nothing surprising in this: thanks to them you can get in a bank the required amount for any need, from repairs to vacation abroad. However, banks often refuse to give a loan, or at least raise the interest rate substantially, if the client does not want to make out more and insurance. In this article we will tell you why you need insurance when applying for a loan, and how it can help in the event of an incident. Is it possible to refuse it when drawing up a loan and how to return money for the insurance already paid.

What insurance programs are available?

According to current legislation, there are two types of insurance:

  • mandatory. It is compulsory if you take out a mortgage or an auto loan. It is impossible to refuse insurance in this case;
  • voluntary. There are many more of them, and, as the name suggests, you can refuse them. For example, insurance against loss of work due to various circumstances, loss of ability to work or property rights to the object of credit, as well as against the withdrawal of the borrower from life.

On average, the cost of insurance is up to 30 percent of the loan amount. This is broken down into several portions and must be paid in conjunction with your loan repayments.

What Insurance Benefits

Many people tend to think that insurance is just another opportunity for the bank and its partners to make money. However, it’s much simpler than that. The only purpose for which a bank can insist that a borrower take out insurance is to protect their funds, the borrower himself, and his relatives from the negative consequences of not paying the loan. Stories when a consumer loan became a problem due to loss of stable income or illness are not uncommon. And, unfortunately, when a borrower dies, his or her relatives may inherit the need to repay the loan. Unforeseen circumstances – something that can happen to anyone, and it is the right insurance program can help to avoid the maximum number of negative consequences for both the bank and the client. That is why the bank encourages clients to take out insurance and then reduces the interest rate on the loan.

How to protect yourself when taking out insurance

Many borrowers still have a distrust of insurance: they take a loan from the bank, but have to enter into a contract with a third-party insurance company. The bank is responsible for all risks, if they exist, because it is the bank that is interested in the return of credit funds in a force majeure situation. That is why it is important to select the bank responsibly when applying for a credit: proven, reliable financial institutions cooperate with similarly reliable insurance companies-partners. And in the case the insurance company refuses to pay the credit amount independently, it carries out an investigation, and in the case of an unreasonable decision to seek justice. Large banks cooperate with the leaders in the insurance market, which offer many programs and flexible conditions.

What else is important to know when taking out insurance

The most important thing for the borrower is to include correct information about themselves when filling out the form. Hiding dangerous hobbies or chronic diseases, of course, will reduce the cost of insurance. However, if an insured event occurs due to a circumstance that the client has withheld, the insurance company may deny reimbursement.

Can I Refuse Insurance

The borrower has the right to refuse insurance when applying for a consumer loan, and the bank should not impose this service on him. However, if you refuse, the bank has the right to increase the interest rate, and the risk of denial of the desired amount is seriously increased.

How to get back money for insurance that has already been taken out

If when drawing up a loan you decided that insurance is necessary, but after all changed your mind, you can return the insurance premium. To do this, you must within 14 days of signing the contract, during which the borrower can terminate the contract. To do this, you need to write an application to the insurance company. You will get a full refund minus the days that have passed when the policy was valid.

Whether you need insurance

It depends on the size and term of your personal loan. If the loan amount is small, there is probably no reason to have insurance. But if you take out a large loan for a long term, it is better to protect yourself and your family from possible risks. In this way, you will not have to fear unexpected financial problems.