When applying for a loan, any borrower will face the issue of insurance. And although cooperation with an insurance company is beneficial, first of all, to the bank itself, the client always pays the premiums.
The financial system works in such a way that risk insurance is often a prerequisite. When applying for almost any loan, the borrower is offered to draw up an insurance contract. On the one hand, the decision on insurance is made by the borrower himself, but often it is provided for by the package terms of the loan agreement. This is one of the ways to reduce the financial risk for the lender. In simple terms, insurance is in the interests of the bank, and it is also the beneficiary. True, in all cases, the borrower pays the insurance premiums. Of course, there is also some benefit for the client from the conclusion of an insurance contract. In the event of an insured event, the insurance company, depending on the terms of the contract, reimburses the bank for the sum insured.
Mortgage and auto insurance
If you buy a house or a car on credit, be sure that you will not get out of the collateral insurance. Moreover, you will have to take out insurance not in the first company that comes across, but only in the one recommended by the financial institution. Usually there are several accredited insurance companies to choose from. When choosing, you should pay attention to the terms of the contract and the amount of the franchise.
In addition, keep in mind that you will have to pay insurance premiums for cars or housing purchased on credit until the loan is fully repaid. The amount of the insurance premium for real estate is calculated from the assessed value of the mortgage. Car insurance is somewhat different and can be of several types. As a rule, when purchasing a brand new car on credit, you will have to insure it in full.
Do not neglect the careful choice of the insurance company, because some institutions are known for their resourcefulness in paying insurance when an insured event occurs.
Borrower's life insurance
Borrower's life insurance is another type of insurance that is offered to be issued when applying to a bank for a loan. The principle of operation of such insurance is that if something happens to the borrower, his debt will not hang on his relatives. The insurance company will pay off the balance of the debt to the financial institution in full. Of course, this is beneficial for both the bank and the client. But, again, the fees are paid exclusively by the borrower.
One more point is definitely worth knowing. Insurance companies do not pay contractual obligations in the event of suicide.
