Some of the most important loans that are contracted throughout the life of an average citizen, such as mortgages. Or those related to the purchase of a new vehicle or access to education, are usually accompanied by insurance for loans.
Having insurance of this type provides several advantages and disadvantages. The cost of applying it increases the final amount of the loan, although, on the other hand, it provides security in the same way as other products, such as life insurance.
What is loan insurance?
Loan insurance allows the family members of the insured to be exempt from the rest of the loan payment; in case of death or disability of the holder. They fall into the category of life insurance, and their characteristics are similar to theirs. As these cover the risks that may affect the integrity or health of people.
Having this product will guarantee the payment of the debt, in addition to protecting family members. So they will not be responsible for dealing with it in the event of any of the circumstances mentioned.
When making the sale of a home, the mortgage loan contract is also made; in which you will find the possibility of opting for the insurance policy. Some banks may even require hiring to be able to grant it since it represents a lower risk for the financial institution.
How many insurances for loans exist?
annual renewable payment protection insurance
First, the annual renewable payment protection insurance, or according to its acronym, TAR. Your premium is paid annually and covers death and disability guarantees.
Payment protection insurance with single premium financed
On the other hand, the second type of loan with an insurance policy is the payment protection insurance with a single financed premium, or also known as PUF. Your premium is fully charged when it is launched and is added to the loan itself. It covers situations such as death, unemployment, and temporary work disability.
Is it mandatory to have insurance for the loan?
Loan insurance is not mandatory under any circumstances. However, it must be admitted that banks are insistent with clients to hire them. In some entities, they may deny the granting of the loan implicitly for not having chosen insurance.
That said, it is really advisable to have insurance for this type. Since many loans become part of the life of the borrower for many years. Therefore, in the event of any incident that involves disqualification from working and providing the necessary funds for the payment of the loan; the family would not suffer this sudden lack of money.