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About Loan Protection Insurance
Loan protection insurance, also known as payment protection insurance, pays off the balance of your loans in the event that you are unable to make the payments yourself. It can help you keep your family in your home, keep your cars out of repossession, and keep your credit score up even if you are on the rocks financially. Naturally, with the economy in an ongoing crunch, loan protection insurance is turning into a very popular product.
The product is available to people between the ages of 18 – 65 who are working at the time the loan protection insurance plan is taken out. From there, the policy provides support for meeting monthly payment obligations for loans and credit card policies in the event that you should become unable to pay. Qualifying events include death or job loss.
Typically, the product will pay out for a set period of time. Common loan protection insurance policy periods range from 12 month to two years. Policies are renewable.
Finding loan protection insurance is simple, as there are many providers. It can be bought through the insurance arms of major financial corporations, or it can be bought independently from specialty providers. Some mainline insurance providers also offer it as an endorsement with a homeowners or auto policy to help cover the cost of the loan.
Information Needed For A Loan Protection Insurance Quote
To get a loan protection insurance quote, you will need information about yourself as well as information about your debts. The combination of information will be used to paint your risk profile and help price your coverage.
For yourself, you will need to provide your proof of employment as well as relevant salary information. You will also need to provide underwriters with your credit profile.
For your debts, you will need to provide the total amount owed as well as your monthly obligations. If you are behind on any of the loans or debts, you may have to become current before you can get a quote for coverage. Coverage is typically quoted at a given rate per $100 or $1,000 of debt protected by the loan protection insurance plan.
Common Loan Protection Insurance Policy Features
Loan protection insurance is a fairly standardized type of financial insurance. The most common loan protection insurance policy features to be aware of when buying a loan protection insurance policy are:
- Waiting or Exclusion Period. For most policies, there will be a waiting period of at least 30 days from the time the loan protection insurance policy is purchased to the date of the first accepted claim. In some cases, the period may be up to six months.
- Defined Benefit. The policy offers a defined benefit in the event of a qualifying event. If you don’t use the policy during the coverage period, it expires without offering a payout.
Loan Protection Insurance Discounts Available
Depending on the source of your loan protection insurance, you may qualify for different discounts. There are some up front discounts available if your take out the loan protection insurance policy at the same time as you get the loan for which the policy will pay a benefit. On the other hand, it may also be possible to bundle coverage with other financial protection products, such as GAP insurance or identity theft insurance. Do your research thoroughly to be sure that you have gotten all the discounts on your loan protection insurance for which you are qualified.
Loan Protection Insurance Exclusions To Note
Loan protection insurance plans do not immediate pay out benefits simply because you aren’t managing your finances or have switched to another type of job. In particular, you may be excluded from receiving payments if you still have some kind of part time employment, even if you have lost your original full time job. Read your loan protection insurance policy carefully to understand how benefits are calculated for underemployment versus true unemployment.
If you are self-employed, you may be excluded from taking out a loan protection insurance policy. Permanently disabled workers or those who are unable to work due to a pre-existing medical condition may also find themselves excluded from benefiting from a loan protection insurance policy.
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