What is Loan Protection Insurance?
Loan Protection Insurance is a form of term life insurance that pays a lump sum benefit for death due to sickness or an accident and will generally also payout on diagnosis of a terminal illness. With Loan Protection Insurance, you will often have the option to expand your protection to also include Trauma and/or Total & Permanent Disability Insurance.
Loan Protection Insurance is designed to assist in meeting your ongoing loan obligations with the amount of protection you can obtain usually set at the amount of your loan at the time you take out the cover. This type of insurance is primarily intended to provide protection for families with a home loan, but other types of loans such as property investment and personal loans may also be eligible.
Loan Protection Insurance may provide some advantages over other forms of life insurance as the underwriting process is often simpler and the premium rates can be cheaper than those of comparable types of life insurance products with little or no underwriting.
Why might you need Loan Protection Insurance?
Loan Protection Insurance provides assistance in meeting your mortgage repayments if you die or, depending on the type of cover you have, you suffer a serious illness or injury or a permanent disability. Whilst intended to pay down the loan or make loan repayments, the benefit is paid to you, or your nominated beneficiaries in the event of your death, and can in fact be used for any purpose. Anyone with outstanding loans against their home or investment property should consider taking out Loan Protection Insurance.