Large loans often have a long repayment period. In most cases, such a loan can simply be repaid. However, it can sometimes happen that the insured person is seriously ill and dies, or that the insured person gets a fatal accident. The loan still runs. In that case the monthly repayments for the longest living partner will be high. To avoid this, you can opt for special insurance. The debt balance insurance protects the partner, and other heirs, in the event that the insured dies before the borrowed capital is fully paid off.
What is a debt balance insurance?
A debt balance insurance is a life insurance policy, linked to a credit. This insurance follows the repayment pattern of the loan and provides, in the event of death of the insured, the balance that has yet to be paid back. The company actually settles the debt of the insured person that he or she still has to the lender in the event of death. In order to be eligible for a debt balance insurance, various factors are often looked at, such as age, duration of the loan, the number of premiums, gender, smoking behavior and the number of medical antecedents. The insurance company will ascertain the health of the insured in advance. After all, the chance is smaller that someone dies when they are still healthy.
A debt balance insurance is not mandatory, but is generally recommended. Especially when you are dealing with a large loan, such as a mortgage loan. In this way you guarantee that the borrowed capital will return to the lender, without your partner or heir having to act on it. Certainly if you have taken out a high loan and the repayment takes a reasonable amount of time, it is wise to take out this insurance.
How much insure?
You can insure different amounts with a debt balance insurance policy. You and your partner can each cover half of the loan amount. In this case, however, the payment for the surviving partner can be (too) high on death. After all, all costs end up on the partner’s shoulders. You can also both take full cover for the borrowed capital: a coverage of 200%. However, the premiums are a lot higher. A middle way is a total coverage, between 100% and 200%, of the borrowed capital. The premiums remain so limited and you are assured that the partner will also be able to repay the remaining amount.