What Does Borrower Insurance Cover? Over a lifetime, unforeseen events may occur and lead to a difficult financial situation. Therefore, it may be more difficult to fulfill your financial commitments, especially in terms of monthly loan payments. This situation may seem unimaginable to some, but no one is immune. Therefore, debtor insurance represents an adequate solution that protects both policyholders and lending institutions.
What should you know about borrower insurance?
This is insurance designed specifically to cover monthly loan repayments when the borrower (for one reason or another) is forced to stop paying their credit. Unforeseen situations can arise at any time, so be prepared and consider borrower insurance with the backs of the eye. Such coverage makes it possible to repay the loans and thus protect the insured against any default in payment of his monthly payments.
Creditor insurance allows the risk of non-payment to be transferred to a third party (the insurance company). It should be noted that there are two types of coverage to ensure credit. Insurance is offered by banks and lending institutions, called group insurance or group insurance. This is the coverage preferred by borrowers since it is very good coverage at a very advantageous price.
The second type of coverage is the borrower insurance delegation. When the borrower refuses to insure his loan with a lending institution, he can choose any insurance company that offers him an individual insurance contract.
Borrower Insurance: What does the borrower insurance cover?
Taking out borrower insurance guarantees the insured the payment of his credits in the event of insolvency. In this sense, it is worth highlighting the guarantees included in such insurance and what they cover:
As its name suggests, this guarantee makes it possible to reimburse all of the capital remaining due in the event of the death of the borrower. The death guarantee is often required by banks and lending institutions. The family of the deceased borrower will also be protected and will not suffer such a financial burden. However, it should be noted that insurers impose certain conditions. This concerns in particular the reason for the death which must not be following the exercise of an extreme sport, suicide, etc.
This is a guarantee that allows the payment of the monthly payments of a loan in the event of disability of the insured. In other words, if the borrower is unable to carry out a remunerative activity, following an accident or serious illness. Total permanent disability or IPT is a guarantee that allows you to repay the entire loan on the condition that the insured proves that he does not receive any income and that he has no more salary in order to finance his loan.
The invalidity rate should be assessed at plus 66%. With partial permanent disability (rate between 33% and 66%), insurance will only reimburse part of the loan, since the borrower is able to carry out an activity more suited to his condition.
3- Temporary incapacity for work
The ITT guarantee is therefore very useful in the event of temporary disability. Indeed, following an accident or an illness, the borrower’s insurance covers the reimbursement of monthly payments during the period of disability (without exceeding 4 months) of the insured. The latter must pay the monthly payments of his loan upon recovery.
4- Unemployment or job loss
The unemployment guarantee makes it possible to repay part of the loan when the borrower loses his job, while waiting for the insured to find a job. This is one of the guarantees that are generally required by banks and lending institutions to grant loans.
Finally, it is easy to see that borrower insurance is essential in some cases, and in others, it can offer many advantages that should always be taken into account.