In some cases it may be useful, if not essential, to take out personal loan insurance. This allows, in fact, to protect both the bank and who signed the loan, that is the customer. Although insurance on the loan is usually an optional choice of the customer, in some cases this can be imposed by the bank as an essential condition (we will see it in more detail below).
Overall we can say that when taking out a personal loan, the choice to take out an insurance policy can be very interesting but, given the cost, it is advisable to carefully evaluate the pros and cons.
Loan Insurance: Worth It?
First of all, it is necessary to understand when it is convenient to take out a policy on a loan and when, on the other hand, this solution can prove to be of little advantage in economic or practical terms. Let’s start by saying that there are certain contexts where banks or financial companies impose the insurance policy as a necessary condition.
This is, for example, the case of an elderly person over 70 years of age. In these cases, in fact, the bank always tends to combine the personal loan with the life insurance policy so as to protect itself if the customer has a health problem (much more frequent after a certain age) that prevents you from facing the debt.
Another example may be that of a customer who has had several reports in crif as a bad payer or, again, for those risk categories such as atypical workers or fixed-term contracts. In these cases, as we have said, it is the lender that considers the loan policy as a necessary condition.
But in most cases it is up to the customer to choose this solution, just as the type of policy and the degree of coverage must also be chosen. Let us analyze its pros and cons.
Advantages of securing financing
The advantages include:
- customizable protection: many insurance policies of this type are customizable so as to allow you to choose the type of guarantee that suits you best. For example, if you are a precarious worker you could insure yourself against the loss of a job, if on the contrary you are an elderly person you could take out a life insurance policy;
- protection of the heirs: the heirs can be forced to face your debts in case of premature death or inability to pay. With an insurance policy you avoid this from affecting the people you care about;
- ease in accessing credit: undoubtedly an insurance policy protects the bank and, consequently, makes it easier for you to access credit on advantageous terms;
Among the negative sides we point out:
- higher cost of financing: undoubtedly an insurance policy on financing has a cost (much or little depends on multiple factors including the size of the loan, the age of the applicant, the type of income, etc.) which raises the loan amount ;
- payment of the premium: the payment of the premium varies from policy to policy but in principle there are 2 solutions. The first is the one with a single payment of the premium at the same time as the loan is started, the second is the installment of the premium itself with the application of a small portion of interest;
Where to subscribe for protection: banks and companies
In this part of our guide we want to point out a selection of policies specifically designed to meet this need. In this way we try to offer you a complete overview of what the market offers. We remind you that, by law, you are free to choose an insurance policy at your convenience.
So the bank can force you to take out loan insurance but it can’t force you to choose your own. This is just to make you aware of what your consumer rights are, then it is up to you to assess whether the one offered by the bank is the most convenient policy or there are other better ones.pplied.