Insurance package is a type of loan insurance and offers protection from risks that could hinder loan repayment. In such case, the insurance package is used to repay separate instalments or the entire loan. This package is recommended particularly in case of higher loan amounts which require longer or repayment periods that are hard to predict. This way, the loan beneficiary can rest assured that in case of activating the package, successors won’t be burdened by loan repayment.
How does a loan with installment insurance work?
Technically, the insurance package works as a risk insurance with decreasing maintenance costs. Other names include loan repayment insurance or outstanding debt insurance. The premium amount equals the outstanding debt under the loan and each month the repayment of installments decreases, hence the insurance costs also decrease.
When is loan insurance applied?
The repayment of loan installments is normally insured in the event of loan beneficiary’s death. Usually, the obligation of loan repayment is inherited by (legal) successors. If a loan insurance contract was signed beforehand, the insurance is used to repay the loan. Depending on the type of the contract, the insurance can also cover loan repayment in the event of unfitness to conduct business activities. The insurance will cover the repayment of monthly installments until you again become fit to conduct business activities.