Loan Protection Insurance

Personal Loan Insurance

What is Loan Protection?

Most people that take out a personal loan are the people who need protection the most. In the event of that unforseen accident or situation arises, how would you cope financially? What would likely happen?

No protection can be the cause of:

  1. Credit rating suffers, because the repayments are not met; either due to having to have a second loan, or because there is insufficient income coming into the household, because you are off work.
  2. Any holiday time and pay that has been saved up, quickly disappears, along with any sick time available.
  3. Any savings are eaten away, as the bills continue to come in, but the income does not.

Personal loan insurance products assist in maintaining your financial position, and credit rating.

 

Personal Loan Insurance products

Loan Protection Policy
The policy covers the personal loan repayments if the policy holder cannot work due to accident or sickness, or become unemployed through no fault of their own, and will pay the loan out if they pass away.


There are basically four products that insurance companies offer in Australia:

  1. Life Insurance
    If the insured passes away the balance of the loan amount will be paid out.

  2. Involuntary Unemployment
    If the insured were to lose their job through no fault of their own then Involuntary Unemployment will cover the repayments for a period of time.

  3. Disability Cover
    Disability insurance will cover the insured if they can’t work in the event of sickness or accident, and will pay the repayments.

  4. Trauma Cover
    Trauma cover provides the insured with a lump sum payment if in the unfortunate event they suffer from something that is more long term, for example cancer or a stroke.

With some insurance companies you can not purchase one product by itself, while others group them all together as part of the ‘standard loan package’.

Before including any insurance product in with your personal loan take the time to read the policy disclosure statement (PDS) and know exactly what you are covered for, and not covered for.

In most cases the personal loan lender will add the costs of the insurance products ontop of the loan, so you will want to know the repayments with, and without the added cost of the insurance products.