If you are applying for a loan on major items such as a car or new house, your lender will probably ask you to fill out a form for credit insurance. If you have wondered what this insurance is for and if it is just a means for your lender to strip more cash out of you, think again. It is actually one of the most important types of insurance coverage that any businesses dealing with finances must have. The range of policies available through credit insurance Australia has today is designed to protect businesses from major losses due to bad credit. Hence, it is also beneficial on the debtor’s end because the insurance will cover for your payments due to unforeseen circumstances that will limit your ability to pay off the loan.
What is Covered?
To fully understand whether credit insurance Australia has to offer is going to be worth the extra payment, it is important to examine what it covers. In simple terms, credit insurance will cover a percentage of or in full of the loan you owe your creditor. There are certain clauses specified within the credit insurance policy that you purchase as to what qualifies for them to cover payment of the loan. Some of the common clauses include accidental death or disability that will prevent you from working (and thus, prevent your ability to earn income too).
This is further explained by your broker when you choose from any of the top three categories of credit insurance available in the market right now. First is credit disability insurance. From the name itself, you will have an idea that your loan payments will be covered by the insurance company on your behalf when you suffer from accidents that cause injury or illness leaving you unable to work.
The second type is called involuntary unemployment insurance. The insurance company can also cover your loan payments in case of loss of job due to no fault of your own. One example is when you are laid off from your job. This coverage lasts only for a predetermined amount of time, which gives you the chance to look for new employment.
Lastly, there is credit property insurance. This insurance policy protects any valuable property that is tied up to your loan, such as in the form of collateral. The insurance company will cover for the loss or damage of said property or valuable item.
Is it Necessary?
Credit insurance is necessary for businesses because it serves as financial protection. But when you examine it from the consumer’s point of view, you might have to decide based on your current and projected financial situation. The top companies offering credit insurance Australia has today place emphasis on the projected income. As a consumer, you need to evaluate the life or term of your loan. In a way, you can also protect your family from the burden of paying off your loan in case you are no longer capable of meeting payments. It might not seem necessary now that you are earning sufficient income, but you have to anticipate any unforeseen circumstances and how it will affect your finances.