When it comes to loan protection insurance, there are a few things you should understand before deciding if it is right for you. You need to understand both how it works and what this type of coverage costs.
How Loan Protection Insurance Works
Loan Protection Insurance is a type of optional insurance. It will make a monthly payment for you, if you are unable to make your monthly payment on a loan due to a predetermined set of circumstances. These circumstances may include unemployment, sickness, or an accident that causes a temporary disability. In most cases, you must be employed for at least six months when you purchase this insurance coverage.
Loan Protection Insurance can be used on a car loan, a personal loan, credit cards, or another type of financial loan. There are many choices available, so shop around to find your best price. You do not have to purchase loan protection insurance from the same place you got your loan. It can be purchased as a separate policy.
Time Frame and Waiting Periods for Loan Protection Insurance
If you do lose your job, become ill, or are involved in an accident, your monthly payment will be made for you for a specified amount of time. Some policies will make your payments for 12 months, others for 24 months. This is all predetermined before you sign your policy papers.
For most insurers, there is a waiting period before the payments will start. Some companies require 30 days of continuous unemployment before they pay. Other companies will require you to wait 60-90 days after an accident or illness before they pay. This is all part of the terms and conditions of the policy and will affect your premium payment depending on the coverage you want.
The Cost of Loan Protection Insurance
The cost of this very specific type of coverage will depend on many factors. Some of these factors are:
-The state you live in
-What type of policy you purchase
-What type of coverage you would like
-Your credit history
When getting quotes for Loan Protection Insurance, you will typically be asked if you would like an age-related policy or a standard policy. Age related policies usually have a lower monthly premium the younger you are and a higher premium the older you are. A standard policy is the same no matter what your age.
Most policies will charge a certain amount of cents per $100 of the loan. For example, if your loan is for $8,000 and the insurance company charges .15 cents per $100, your monthly premium would be $12.00 per month. Other policies will take a certain percentage of your loan amount and determine your monthly premium that way. The higher the loan payment is the higher the premium.
Your credit history and credit score may also have a bearing on your monthly premium. If you have had trouble making loan payments in the past or you have a low credit score, you monthly premium may be higher.
Other more flexible policies will offer a straight cash benefit paid directly to the policy holder to be used for any purpose they choose if they should become unemployed. This type of mortgage protection insurance is becoming increasingly popular as a way to safeguard against the possibility of an unforeseen lay off.