What is Loan Protection Insurance & Do I Need it?

Loan protection insurance works like other insurances. That being, it provides coverage to your loan repayments if anything that is outlined within your policy affects your ability to repay the loan. Loan protection insurance works as a protection for your finances, and it can cover a wide range of unfortunate circumstances that could put a burden on your ability to repay the loan yourself. Loan protection insurance can help both you and your family, pay off any debt that might be impossible for you to do on your own. We will give a brief explanation of the benefits of loan protection as well as the different coverage that are available. The five different coverage that your loan protection insurance may have in their policy are; disability, terminal illness,

redundancy, bankruptcy and death. Loan insurance is often a product we only think about when it is too late, so we thought we would provide the information here so that you can think seriously about the matter.


Different Types of Coverage

Disability coverage: Provides protection for any accident or illness that would make you unable to engage in your usual occupation. Implying that the necessary medical evidence is provided, disability coverage can be granted once a certified doctor has deemed you of being unable to work.

Depending on your policy, the coverage will begin at about seven days after a doctor has deemed you unable to work and will continue until you are no longer disabled or the policy ceases (this is subject to the loan protections terms and conditions.) You, however, are only eligible for disability coverage if you have been working for 60 days or more (again, dependent on policy) before disablement as well as having your employment on a permanent basis of at least 25 hours per week.

Terminal Illness Coverage: Your remaining loan balance will be covered from the date given of your date life expectancy. The necessary medical evidence must be provided, and the results must be from a specialist doctor.

The life expectancy period that will make you eligible for this coverage is subject to your loan protection insurance provider, so reading the terms and conditions for this coverage is recommended.

Redundancy Coverage: Protects you if your employer terminates your employment. This termination of employment must be because the position held by you, is, or will become redundant to the needs of the employer. The coverage cannot start until after an initial stand down period of 30 days, in which you are expected to cover your loan payments still. But after this period, the payments will be covered for you until your unemployment ceases or another one of the terms of your loan protection insurance is met.

Bankruptcy Coverage: You are eligible for bankruptcy coverage if you have been declared bankrupt by the New Zealand High Court. The payments will be made to your loan during this period until you are discharged from your bankruptcy or one of the other terms of the policy is met.

Death Coverage: Covers the unfortunate circumstance of your passing so that the debt of your loan is not passed on to your family members. The outstanding amount of your loan will be made on the date of your death, but any missed payments or additional interest that has accrued as a result of your arrears may not be covered.


Why Get Loan Protection Insurance

Well like we said at the beginning, it’s just like any other insurance. We never know what is going to happen in the future, but we can sleep easier at night knowing we are secured. Getting a personal loan can be a big life decision as doing so can affect how you budget over the repayment period as well as grant you access to funds that can assist you in achieving your life goals. If you are thinking seriously about getting out a personal loan that you will be paying off over an extended period, loan protection insurance might help relieve some of the stress for you.


How to Get Loan Protection Insurance

To get loan protection insurance, you can apply with the institution that you are getting the loan from or else look elsewhere at a third party or external financial provider that can offer competitive deals. Each financial provider will offer different rates, and terms and conditions. So doing your research and shopping around is recommended. The annual premium you may pay for the loan protection insurance may be added to your regular weekly/monthly payments or else paid up front in a lump sum. With the premium amount being calculated on a percentage of the amount that was financed for the loan, which again is subject to the financial providers offered rates.

So there you have it. Insurance is never a fun topic to talk about as you never like to think of a future where such an incident may affect you. But it is a real issue, so it is best to do your research and find out what coverage is available. You don’t want to be that person who thinks about loan protection insurance when it is too late, and the premiums have gone up due to you being more at risk. Find out early about the benefits the coverage can offer and weigh up whether loan protection insurance might be right for you.


For more information on loan protection insurance and the protection we offer, you can view our provider’s policy, Southsure Assurance limited.

Click Here to see the policy.