- Why it is not mandatory to take insurance for a personal loan?
- Know all about the deciding factors before opting for an insurance scheme!
- Why bank executives push customers to take an insurance scheme?
NO! It is not mandatory to take insurance for a personal loan. I thought of telling you this straight away unlike the executives from different banks and financial institutions who won’t.
Instead, it may be possible that the executives will tell you lies about how it is utmost mandatory to have insurance cover to get a personal loan. With having a fear of rejection, you may fall into the trap of them and decide to take insurance for your personal loan.
What is Personal Loan Insurance?
To save yourself from falling into the trap of their lies, let me tell you what is personal loan insurance is? By opting for an insurance cover on your personal loan, you ensure that if any of the unwanted situations like sudden unemployment, medical calamity or even death happen in the future where you won’t be able to repay the loan, your personal loan insurance will cover all your remaining due installments.
Personal loan insurance will protect you and most importantly, your family from such unforeseen circumstances. You can either pay the insurance premium upfront with a lumpsum amount or you can pay it through EMIs attached to your regular loan installments. Shall you opt for it? What are the factors that you keep in mind before opting for it? Why do banks want to have you an insurance plan for a personal loan? Just read on to find the answer to all these questions!
What are the Various Factors to Keep in Mind Before Applying for Insurance?
Opting for insurance isn’t compulsory but, it would be a wise decision because of the convenience it provides to your family. So I have curated some important factors that you must consider before opting for an insurance plan. These are mentioned below.
Always Check Your Affordability
Yes, you read it right. There is no use of your insurance if you can not afford it. You only planned for the personal loan, not for the insurance. So, it will be an additional expenditure for you and making a space for an insurance premium in your finances would need more money – Either to pay the premium in lumpsum or in installments. In the installment option, the whole premium amount will be added to the loan amount. The EMI applicable will be inclusive of interest, which only makes the whole premium costlier.
Check if You Already have a Life insurance cover
Personal loan insurance will be totally worthless if you already have a high life insurance cover which will be sufficient enough to protect your loan in case of any mishappenings. Bank executives will always try to sell you the insurance facility, but you can politely decline the offer since you’re already covered. But in case, if your life insurance coverage doesn’t fully fill the risk, then you should look for an option.
Always COMPARE Different Insurance Schemes
Since you were not prepared for this, and bank executives told about the insurance schemes at the last minute, it is possible that you may opt for the costly scheme without even having proper information about it. So it’s important that you do your research before opting for the insurance scheme. Compare different schemes thoroughly; find the answers to questions like what are the premium rates, which is the most affordable scheme for you before selecting the scheme.
Always Know Your Scheme Inside Out
Always check the terms and conditions that your insurance scheme is offering. Because there are various schemes which do not cover situations like sudden job loss and some do not cover incidents like natural death and sometimes there are many clauses in the case of disabilities. So it’s important that you must know all these conditions before zeroing out the suitable insurance scheme for you.
Always Check the Foreclosure Charges Associated with Your Scheme
Foreclosure occurs when you decide to pay off the loan before the fixed tenure. In such cases, it is possible that you could lose the insurance benefits associated with it. So it’s important to know this whether you’ll get any refund if you’d paid it via lumpsum or will you have to pay the remaining premiums if you had opted for the EMI process? It’s important to know all the terms and conditions related to it. So, read the fine print carefully before giving your consent to the personal loan insurance scheme.
Why do Banks Want to Have You Insurance on Your Personal Loan?
Any lender needs to have the assurance that a borrower will be able to repay the loan amount and they want to make sure of it by any means possible. Getting them an insurance plan clubbed with the personal loan facility is a suitable option to ensure it.
After reading this article, I expect that you now must have a lot more useful information about insurance protection for a personal loan. And now you can take a much more informed decision about it. In my opinion, opting for insurance is always a wise option as it gives you a much-needed cushion against any mishappenings. It saves your family from your liabilities and being suffered because of it.
Provided you do your research properly and choose the best scheme from one of the many major insurance companies out in the market, insurance for a personal loan is a great thing to have.