www.caspot.com brings you the exclusive post of Define And Explain Credit Insurance ? Know About Credit Insurance
CREDIT INSURANCE
Before I begin, though I have discussed
about credit insurance in detail, I would like to say that this type of
insurance is not usually offered in India. It is a new form and not much
talked about. Thank you.
WHAT IS IT?
Credit insurance protects both the insurer
and the lender in the event of death, disablity, unemployement. It pays
the amount of debt due directly to the lender in the event of occurance
of the stated circumstances. It is mainly sold in connection with
specific loan. Cost of insurance (if any) is generally built into the
loan amount.
WHAT ARE THE TYPES OF CREDIT INSURANCE?
a. Credit life insurance: It pays off the debt in the event of death.
b. Credit disablility insurance: pays
off monthly installment directly to the lender when the insured person
is disabled. Insurance company may impose condition on number of days
for which disablity should continue then only the debt installment shall
be paid to the lender.
c. Credit unemployment insurance: Pays
monthly installment directly to the lender in case of involuntary
unemployement like layoff. Condition for minimum period of umenployment
shall be imposed after expiry of such period only the benefit shall be
paid.
THINGS TO BE CONSIDERED
Some of the common questions every person should ask themselved before taking the insurance are:
a. Do I have any other insurance or other
assets? If yes, will my existing resources be sufficient to meet my debt
obligation in the event of death, disability or unemployment?
b. How much is the premium? Will it be better to opt for traditional life insurance or disability insurance?
c. Will the insurance cover the full term of loan and the entire balance?
d. What conditions are not covered by the policy?
e. Can I cancel the insurance
f. Can the insurance company or the lender cancel the insurance?
g. Will the terms of policy be changed
without my knowledge? If no, in the event of change will I be notiifed
in suffiicent advance period?
FOR WHAT TYPE OF LOANS CREDIT INSURANCE IS AVAILABLE?
Credit insurance is available on all types
of personal loans. Examples of loan on which credit insurance is
available include purchase of appliances, vehicles, farm equipments, as
well as educational, credit card, mortgage loans.
HOW IS IT PAID FOR?
There are two primary ways to pay for credit insurance:
Single Premium: The
premium is generally added to the loan amount and included in the
amount financed. This increases the amount borrowed as well as the
amount of interest you will pay.
Monthly Premium: Monthly
premium is calculated by multiplying the outstanding balance in your
account on the account’s monthly billing date by the premium rate or by
multiplying the average of the daily loan balances during the previous
month by the premium rate.
WHAT IS THE COVERAGE OF THE INSURANCE?
Some credit insurance policies may not cover the full term and amount of loan. It depends upon the policy taken.
NOTE :
Certain other factors which may affect the decision to take credit insurance are:
Eligibility: Let us understand this with an example:
Suppose Mr. X is 25 year old and Mr. Y is
66 year old. In this case it would be easier for Mr. X to get credit
insurance because of his age.
Let us take another example:
Suppose Mr. X though young had suffered
from serious medical condition in the past. In this scenerio it would be
difficult for him to get credit disablility insurance.
Thank you for reading.
IF YOU HAVE SOMETHING TO SHARE THEN PLEASE USE THE CONTACT US BUTTON OR TALK TO THE ADMIN : NISHANT JAIN ON FACEBOOK
YOU MAY ALSO LOOK AT OUR JOBS WEBSITE :
Blogger Comment
Facebook Comment