What is the need of Financial Insurance?
Those people who work within the financial area, who run a business or who are involved in the financial market due to their mortgage or other loan-types, need a careful consideration regarding the risks involved in their operations.
In order to get a certain financial protection, these people are recommended to take a look at the types of the financial insurance.
There are many such insurance-types, and people should choose based on their primary needs. Loan Protection Insurance, for instance, protects people against insolvency: for situations when people become unable to pay their car, personal, home improvements, debt consolidation, or other type of loans. It is important to note that people are not obliged to get this loan-protection insurance from that company whom they get their loans.
In order to know whether it is worth purchasing loan-protection insurance, understanding how it works is of primary importance. It is an optional insurance, so an additional service made by the insurer in case insured individuals do not manage to pay their monthly instalments towards their loans, but only if this insolvency is the consequence of certain circumstances listed on the contract. If such a claim is made, the insurance company will pay the instalments for the insured. Acceptable consequences are sudden unemployment, accident or illness which events may cause the insured person’s temporary financial disability. It is obligatory, however, for a person to be employed for 6 months before he/she becomes eligible for this type of insurance-coverage.
Note that the insurance-company is obliged to pay those loan-instalments instead of the insured only for a specified period of time! This varies from policy to policy, but generally is between 12 and 24 months. Also, there might be a waiting-period before the company will start to pay. This may be 30-90 days long, and may render more difficult the situation. Therefore it is useful to check the different policies’ terms and choose the most advantageous insurance-type. The Loan Protection Insurance’s costs depend on the insured’s age, his/her personal and financial circumstances, the protected loan’s size, the policy and coverage-type, as well as one’s credit history.
Another financial insurance-type is called Credit Insurance, and provides protection for the situation the insured is unable to pay his/her credit-card bills. This insurance-type might be useful especially for those who have large debts, because in case they lose their jobs, they might become bankrupt. Similarly, one may get into a situation of not being able to pay their monthly payments even without losing their jobs, due to unforeseen events.
A third type would be the Mortgage Insurance. Private Mortgage Insurance or PMI protects lenders in case the borrower becomes unable to pay. This insurance is made obligatory by lenders for borrowers in case they get a loan with loan-to-value percentages to a degree beyond 80%. However, after the borrower’s payments on the mortgage’s principal have reached 80%, they should notify their lenders to discontinue charging PMI-premiums.
Finally, the Income Insurance is considered to be a must from the financial-insurance category. This insurance protects the insured by providing him/her with a tax-free income monthly in case he/she becomes unable to work (and thus, will not get an income). The reasons for insolvency may be a serious accident, a long-term sickness, or others.
Here are some important advices that need to be taken into consideration. First, it is essential purchasing insurance from a company that is authorized. Second, after finding an appropriate insurer and policy-type, it is important to disclose the full facts regarding the coverage-type. It is crucial in this sense to read out the fine-prints and the description of the exclusions. It is of capital importance to inform about the surcharges to be paid in case of a claim. It may happen that the insurer will make the payout only after certain fees are paid by the insured. This excess-fee might be calculated based on the number of clauses, so it is good to know what to expect. If the offer is not so attractive, it is better to look for another insurance-supplier. It is obviously worth shopping around to get the best policy and not to overpay for a certain protection.