A credit insurance is not yet so well known and yet it can sometimes be very helpful!
Certainly, the question will be in the room, what exactly is a credit insurance. In modern times you can actually insure everything and thus a loan. Here, however, the loan is not insured, but the repayments.
Credit insurance often has other names, but their benefits are the same. It then intervenes when the borrower can no longer afford the repayments. For example:
- Too high credit rates
With a credit insurance then many different points can be insured, like death protection or also incapacity for work. However, one should keep in mind that the more points covered by such a credit insurance, the higher its price. Therefore, it is advantageous to look at when you should deal with the subject of credit insurance!
The problem in detail
The situation: More and more people are talking about credit insurance, but when does it really make sense?
The Challenge: Especially newbies in the field will certainly have problems recognizing when insurance is needed and when it’s easier to do without it.
The solution: You should approach this topic with calm and patience. Comparisons, consultations and more are the way to go.
What does a credit insurance offer?
Of course, many people will think that credit insurance covers only the lender, but this is not the case. Also, the borrower can draw numerous benefits from such insurance and therefore it sometimes makes sense to learn about a credit insurance.
It happens quite often that one can suddenly no longer pay the loan installments. Of course, the debt will pile up and the lender wants his money back. In the worst case, this can end with garnishments.
To prevent this from happening, you can take out credit insurance. This helps in unpleasant situations and can handle big problems.
Why should one use a credit insurance?
The most common reasons for an insolvency are:
- incapacity for work
These conditions usually occur unexpectedly and suddenly and then you should be protected. If such a case has occurred and one has no credit insurance, then it can come to high debts.
An alternative to credit insurance
One can compare a credit insurance with a term life insurance. Both have a similar structure and if you already have a term life insurance, you do not have to apply for credit insurance in most cases. But before you turn it down, you should take a close look at the performance of other insurance companies to make sure that the situations are covered.
Likewise, term life insurance is often a more comprehensive solution. In the case of credit insurance, only the mortality risk is hedged during an ongoing loan. On the other hand, the term life insurance continues beyond this point in time. In many cases, term life insurance is even the more viable alternative to credit insurance.
You often pay less and just if you are the only worker in a family and thus responsible for them, you should conclude such insurance in any case.
In such cases, credit insurance can help.
If you have taken out credit insurance, this will go into repayments of due credit installments. This can only be for a short period, but also until the loan is fully paid. For the credit insurance to come into force, one must first decide between different variants.
The more risks you include, the more expensive the insurance will be every month.
Most insurers have credit insurance for death. In addition, there is also the death insurance with incapacity or unemployment. Even all three points can be secured.
Of course you are best served with the last variant, but often such a high level of protection is not necessary. You should only use this if you work in a dangerous or endangered profession or if you are self-employed.
Looking for the right credit insurance
If you want to take out a credit insurance, then you should not turn to the lender. This will pursue their own interests and personal needs may fall by the wayside. That’s why you should choose an independent insurer.
A good way to find one is the internet. Matching comparison portals offer the opportunity to take a close look at numerous credit insurances and to compare them. Also, an objective advice can be very helpful and you can connect directly to the insurance via the Internet.
But before doing so, you should create a pros and cons list.
On this list you write down then which points for a credit insurance speak and which against. Here you should include occupation, family, environment and other factors.
In addition, one should also take a look at the credit. For small loan amounts or a short term, it is usually meaningless to conclude a credit insurance. If, on the other hand, it is very high sums and a long duration, one should think about such insurance. Only after all these points you can be sure, whether a credit insurance really makes sense or not.