Secure Your Borrowing with Personal Loan Insurance

Personal loan insurance has come up as an effective way to insure your personal loan. When you take a personal loan, you need to repay the amount in the form of EMIs. Now, if an unfortunate emergency arises, in case, affecting your ability to manage funds, a personal loan insurance can help you. Also known as payment protection insurance or PPI, insuring your personal loan can be a step ahead in protecting yourself and your family from unexpected financial burdens.

What is a Personal Loan Insurance?

Personal loan protection insurance is a type of insurance that helps you pay off the loan when something unexpected occurs. This includes the following:

• Unemployment
• Critical illness
• Disability
• Loss of life

Any of such circumstances can make you unable to pay the EMIs. The insurance cover helps by covering your outstanding loan amount during such instances, thereby supporting your family and protecting them against financial stress.

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Why Consider Personal Loan Insurance – Benefits of Personal Loan Insurance

Peace of Mind

When you know that your loan has a coverage for support during tough times and financial distress, you are able to live with comparatively better peace of mind. Your worries about finances and family lessen substantially.

Protection of Your Family

If the person in whose name a personal loan is taken, suffers death, his/her family is left with the burden of repaying the remaining debt. Having an insurance can eliminate that burden by covering the whole amount and protecting your family from having to pay the EMIs.

Affordable Premiums

The insurance premiums are not very expensive. In fact, they are considerably low when compared to the amounts of loan they cover for you. The insurance is usually quite affordable for everyone.

Flexible Coverage

Based on your specific loan amount and personal circumstance, the insurance provider may use different insurance plans to customize coverage and ease things for you.

Unaffected Credit Score

When the EMIs are well taken care of, the credit score is automatically well-handled. Credit score is a number that show your creditworthiness. A good credit results from timely payments of the EMIs.

Tax Benefits

Last, a few loan protection plans also offer tax deductions. This helps you save a significant amount in the form of tax deductions under Section 80C of the I-T Act, 1961.

How Does It Work?

Similar to any other insurance policy, you get to choose one from several plans based on your needs. The premium is paid in lumpsum or included in the EMIs. The amount of premium varies with your age, income, health status, loan amount, etc. Various life events are covered that may affect an individual's ability to repay the loan amount.

These days, almost every lending institution keeps the option for a personal loan insurance. The same can be customized as well.

Types of Personal Loan Insurance

Two types of Personal Loan Insurance:

Term Insurance

If the person who took the loan dies during the loan tenure, the term insurance provides a lumpsum payment to the nominee. The sum typically equals the outstanding loan amount to settle the debt, so that your family remains away from the burden of the debt.

Critical Illness Insurance

If the person is diagnosed with a critical illness, the insurance company pays out the lumpsum amount to let you focus on your health without having to worry about the loan repayment.

How to Choose the Right Personal Loan Insurance Plan

Choosing the right personal loan insurance plan is important. It can be daunting due to the presence of a lot of options. Take a look at a few points below for better decision-making:

Assess Your Needs

You should pre-assess your needs based on your financial situation, personal loan amount, and family's requirements to determine the right coverage amount.

Compare the Plans

Do not just settle with the first plan proposed to you. There are various insurance plans that can prove to benefit you more. Study them all to make informed choices. Focus on coverage, premiums and exclusions.

Go Through the Fine Print

Read all terms and conditions beforehand to know all about the coverage including any waiting periods that may apply.

Check the Claim Settlement Ratio

To know about the company you are planning to take insurance from, check its claim settlement ratio. A higher ratio means it is more reliable and pays out the claim amount promptly and as decided. You should check the popularity of the company to ensure that you are choosing a good one.

If you're planning a personal loan, also consider insuring the same for all above-mentioned benefits.

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