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WHY CREDIT LIFE INSURANCE?
Life is full of uncertainties, especially where credit is involved. Therefore, as a lending institution, it is important to ensure that you are covered for any finance or credit that you may advance to your clients in case of unforeseen circumstances.
When financial institutions loan money, part of the risk they accept is that the borrower might die before the loan is repaid. Credit life insurance protects the lender and, by default, also helps ensure your heirs will receive your assets
Credit Life Insurance is a life policy designed to pay off a borrower’s debt if that borrower dies, becomes disabled or is retrenched before the loan is fully paid back to the lender.
The face value of a credit life insurance policy decreases proportionately with the outstanding loan amount as the loan is paid off over time until there is no remaining loan balance.
One advantage of credit life insurance polices is that they often have less stringent underwriting requirements. No medical examination is required
WHAT YOU NEED TO KNOW
What Are the Key Features of Credit Life Insurance?
Death: In case of death (due to accident or illness) of a Borrower, the outstanding loan amount of the Borrower is paid to the Bank. 2. Permanent Total Disability (PTD): In case of permanent total disability (due to accident) of a Borrower, the outstanding loan amount of the Borrower is paid to the Bank. 3. Critical Illness: Covers the first positive diagnosis of a critical illness, of a borrower (Heart attack, Cancer, Stroke, Kidney failure, major Organ Transplant, Coronary Artery Bypass Surgery & Paraplegia). 4. Retrenchment: Covers loss of employment/Involuntary termination of employment. This means without the employee’s fault, their employment is terminated through the employer’s initiative
What Are The Benefits of Credit Life Insurance?
Credit Life Insurance protects the lending institution against risk of losing money. The family of the deceased also gets to keep the asset/property that was financed by the borrowed funds even after the death of the borrower. Removes the strain of repaying loans by the families of the departed member. And provides a more economical coverage because of mass purchase and group discounting.
What Is The Target Market For Credit Life Insurance?
The cover is meant to protect the lending institutions that advance Mortgage loans, Personal loans, Instalment finance, Overdraft facilities or Credit card facilities against risk of unexpected death, disability or even loss of employment of a borrower. Mostly, the policy is effected by the financier on the lives of the members to whom credit is being offered. Hence the financier becomes the Assured and the borrowers are the Members of the group credit scheme
What Is Required To Place Credit Life Insurance?
The following are the details required per member for the policy to be effected – Debtors’ Names, Date of Birth of the Borrower, Type of loan, Amount of Principal loan granted, Repayment Period/ Duration of Loan (in months), Loan Start Date and Interest Rate per annum charged on the Loan.