As soon as you want to take out an installment loan as a creditworthy loan prospect, ask yourself whether installment loan insurance is really necessary. There is residual debt insurance, which can be taken out for the personal death of the borrower. This residual debt insurance pays back the remaining loan amount to the lender in the event of the borrower’s death.
In addition, this insurance can be extended if necessary, so that in the event of a longer incapacity to work that lasts longer than six weeks or a possible innocent unemployment after a few months, you will be repaid for the loan. Risk life insurance is paid in the event of the policyholder’s death and is not directly linked to the regulation of bank credit.
The advantages and disadvantages of installment credit insurance
Taking out the loan becomes a risk for your family if you suddenly cannot pay the installments due to a long illness, loss of job through no fault of your own or, for example, a fatal car accident. Unpredictable events can throw your family off the rail humanly and financially, and adequate insurance coverage reliably protects the borrower’s failure.
The information about the installment credit insurance and the conclusion with a bank increase the total cost of the loan. In the case of construction loans with a long term, taking out residual debt insurance is one option in the event of death not to burden the family financially with the residual loan.
With smaller installment loans, residual debt insurance is often too expensive and is actually only required if there is no other insurance cover. With new insurance companies, it is worth comparing the insurance offers, because direct insurance policies are often significantly cheaper.
Check residual debt insurance in individual cases
When considering whether you need insurance coverage for the loan, you should note that the insurance amount of the selected insurance must not be too high. After all, you already have to pay the repayment rate, the processing fees and the interest. As soon as an excessive amount of insurance is added, there is a risk that the initial costs will burden the family budget. With a residual debt insurance, the insurance premium is usually due at the beginning.
The insurance cover then extends over the entire term of the installment loan. If the insured person dies during the loan term, the existing residual credit insurance takes effect and pays the remaining loan amount. If you already have a life or risk life insurance policy, this is usually enough to secure a small loan.
Credit-independent insurance can be cheaper
If you already have insurance protection through a capital or risk life insurance, this is often sufficient for a smaller installment loan. For uninsured people with high loan amounts, insurance can be a good option to protect the family from financial burdens from the loan in the event of death.
When taking out installment credit insurance through the bank, the insurance premium is often immediately payable as a one-off amount. It can be more economical to take out insurance directly, regardless of the loan.