Those who have a fixed income and have not previously had any payment notes usually get their loan applications quickly processed with a positive response. But what both the borrower and the loan institution then expect is that the income will remain as high as it currently is. But what happens if the person suddenly becomes unemployed, ill or for some other reason can no longer work? Does he / she manage his / her loan then? Some already calculate this when the loan is to be taken out, while others choose another option – they take out a loan cover.
What is a loan protection?
The loan terms and conditions may vary with different loan institutions regarding what applies when signing up for loan protection. The function of the loan protection will be explained below and all figures are taken from Wise Bank, one of the lending institutions that offers its customers this service.
A loan cover is a type of insurance that helps the borrower to pay on the loans if something should happen that prevents the economy from getting enough. Thanks to this protection, you do not have to worry about unpredictable events that reduce your income.
Loan protection is activated if a borrower is terminated (after at least 12 months at the same workplace), gets sick leave full-time or if the employer has died and the person thus no longer has a place to go.
What replaces a loan protection?
A loan cover replaces the latest monthly notice and a predetermined number of months’ notifications to a maximum level of compensation. For example, Wise Bank will pay a maximum of $ 15,000 for 12 months. In the event of death, Wise Bank will replace the deceased’s entire debt.
It is also possible to only subscribe for Loan Protection Life, which means that the loans only fall due in the event of death and that no other compensation can be obtained.
Can everyone take out a mortgage insurance?
Firstly, not all credit institutions offer this “insurance” and in order to insure one must have loans at the company that offers loan protection. The companies that offer the service also always have a maximum age. This is mainly due to the loan being due on death.
Wise Bank’s requirement is that the borrower is a maximum of 60 years and that the person has a loan with them. In addition, the borrower must be fully healthy (they can request medical certificates) and have a permanent employment of at least 22 hours per week. The person must also be both written and resident in Sweden.
Those who only choose to sign up for Loan Protection have the same requirements as above but no requirement for employment.