Loan Protection Insurance, Should You Get It?

Loan Protection Insurance: All there is to know; the Pros and Cons 

If you have a loan coupled with probably a mortgage on your house, you would most likely receive offers of loan protection insurance. Loan insurance in the real sense of it is designed to provide coverage for part or the whole of your loan bill in the event that you are unable to work for a period of time through either unemployment or disability. Most loan protection insurance policies will pay all of your debts if you pass away while other will not. It is therefore important to do an extensive research on the different policies available and for how much. This article will be discussing the pros and cons of a loan protection insurance policy so as to be sure if it is what you really need at that time.

PROS

  1. Peace of mind

Insurance policies are very much uncertain, as nobody actually knows if they will use these policies but the safety net that insurance policies offer is what makes them worth it. The peace of mind that comes with the fact that no matter what happens, you are protected, makes all the difference between you who has a loan protection insurance and someone who does not. The fear of losing your job and being unable to pay off your loan will be eliminated since you have an insurance policy that covers that.

  1. High rate of acceptance

Unlike life insurance policy where people who have existing medical conditions or are too old are denied, loan protection insurance has a high acceptance rate. With a loan insurance policy, your age or medical condition does not really matter as it is all based on your loan. This way, you will be able to make sure your family is adequately protected no matter what happens to you or your job. The loan will not affect your standard of living in any way.

CONS 

  1. Maximum Limits on payments

There is a limit to how much you will get paid in case something happens that keeps you off work. You will not be paid the exact amount you normally received in wages or salary. Instead, you will be paid a set percentage of your wages or salary. Of course, this would be stated in the contract of the policy and as much as this may not seem very fair, insurance companies put this in place so that people will return to work within a short time.

  1. Other available options

If you do not have a very huge loan or do not have to pay very hefty sums each month, then a loan insurance policy may not be the next thing to consider. In place of that you could invest in an emergency fund on which you can fall back on in case fund that will give you a nice cushion that will let you keep making monthly payments if you become unemployed or have a disability. By beefing up your emergency fund to have around 3 to 6 months of your salary, you can ensure that you’re able to remain up to date on all of your bill payments including your loan payments without needing to give up your monthly premium to the insurance company.

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