Loan repayment insurance – what is it?
Everyone who used installments took a loan probably met with an offer of additional insurance, thanks to which in the event of job loss, serious illness or death, the insurer will repay the debt for us. What does it look like for loans? The insurance that covers the loan is nothing but life insurance. In the event of the borrower’s death, his family in no way inherits the financial obligations of the deceased, and any arrears in repayment on behalf of the borrower will be covered by the insurance company. The actual policy holder under such an insurance contract is the lender and only he – in no case relatives of the deceased – can receive money on this account. This solution has also been used by traditional banks for a very long time. The banking sector is even more cautious because it also offers insurance for its credit products in the event that the borrower loses his job and becomes insolvent because of it. But is it worth insuring the loan?
Is it worth insuring the loan and who earns insurance?
Opinions as to insurance, e.g. payday loans are divided. You have to consider for yourself whether you want to insure a financial liability for 30 or 60 days and generate additional costs. However, for loans for a year or more, as well as for higher amounts, it is worth considering this option. Remember to check all insurance-related costs and general insurance conditions. You also need to know that both non-bank financial institutions and banks are only intermediaries in the sale of insurance, so their cost will definitely be higher than if you had searched for it on your own. If you want to insure your commitment, you should look through the offers on your own, which will save you a few zlotys.
Will any lender have to agree to insurance?
There are many companies on the Polish payday market where loan insurance is not compulsory. Many lenders require insurance contracts concluded with them, and the value of this insurance is from 15 to 20% of the loan amount. However, the question of whether it is worth insuring the loan should answer yourself. Below are offers from lenders who do not make such a requirement.
At what amount to decide on insurance?
With the so-called micro-loans, i.e. ones ranging from several dozen to several hundred zlotys, it is not worth to opt for insurance if it is not required. When it comes to several thousand zlotys, the choice is rather obvious and you need to agree on insurance of the money you borrow. There is nothing to resist too much, because it is a form of some protection for your family. The relationship is simple. With higher amounts it is definitely worth insuring the loan.
What to look for when concluding my payday insurance contract?
Each of the lenders publishes all the most important insurance information on its website, so look carefully at the tabs “Promotion rules”, “Documents”, “Contracts” or “Payday insurance rules”. In the relevant documents you can read about your rights and obligations as a person joining such insurance. In both these areas, the contracts with various non-bank companies are unlikely to differ, but you should carefully examine the part devoted to the so-called exclusions.
An exemption is a situation after which the insurance company will not be obliged to pay the benefit. Pay close attention to what your insurance company counts as an exclusion, because the scope of such events can be so wide that in practice the insurance will never work, and then the conclusion of such a contract is completely pointless.
It is worth paying attention to:
- what the situation looks like if we not only lose our job, but also resign from it ourselves or our contract ends and is not extended,
- Are there any exclusions due to certain diseases?
- even death is not certain, exclusion may cover the period after the conclusion of the contract or the type of death.
Can I withdraw from the loan insurance?
Many people think that if they give up insurance after a while, they will significantly reduce the cost of the loan. Such a maneuver is of course allowed by the Insurance Act – every insured has the right to withdraw from an insurance contract previously concluded, and if he / she has duly paid the premiums due, the insurer is obliged in this situation to pay legally accumulated money. However, in fear of losing profits resulting from the insurance commission, which could occur in the event of mass resignation from insurance contracts, the lenders properly construct the provisions in the contract. Withdrawal from insurance is possible, but the customer will have to bear the consequences: the borrower either implements the provision for the immediate repayment of the total loan amount, or the loan interest rate increases to a very high level.
What are the costs of loan insurance?
Many probably wonder what are the amounts that the lender adds to the total amount of debt incurred. These amounts range from 15-20% of the amount borrowed. In summary, payday insurance has advantages and disadvantages. Your decision to conclude an insurance contract should be influenced by the amount of money borrowed. The higher the loan, the more rational the collateral seems to be. However, if you borrow less than 1000 zlotys, you have to calculate whether the insurance costs will drastically increase the costs of the whole operation. And remember – you always have a choice, because there are non-insurance entities on the Polish market of non-banking companies.