The fewer risks a bank has, the more likely it is to agree to issue a loan for a larger amount and at a favorable interest rate. Borrowers have several ways to reduce bank risks, one of which is to take out insurance for the entire loan period. Let's consider the features, advantages and disadvantages of insurance when receiving loans.
How does insurance work?
The service works as follows:
When signing a loan agreement, the borrower takes out insurance. According to the terms, it must be valid for the entire term of the loan. Its cost can be paid from your own funds (one-time or annual payments) or included in the loan amount.
If an insured event occurs, the borrower must submit belgium mobile database supporting documents to the insurance company (IC).
The insurance company takes on payments on the borrower's credit obligations.
Payments may cover the cost of the loan in full or in part - it all depends on the terms of the contract and the specific insurance event. For example, if you lose your job, the insurance company will make payments until the borrower finds a job. In the case of a serious illness, the debt may be fully covered by the insurance company.
Types of policies
Some types of insurance policies are mandatory when applying for a loan. For example, with a mortgage, the collateral (the purchased home) is insured, and with a car loan, CASCO is always included.
Two types of optional insurance are often used in lending:
life and health;
from loss of job (or income).
Sometimes, when receiving loans, other types of insurance are used - against forced reduction of working capacity and in case of loss of ownership of the property. They are not very popular, so we will not dwell on them separately.