Have you ever applied for a loan at a bank? Well, when you are going to apply for a loan or credit, then you may have been asked to take insurance services. Bank loan insurance services sometimes require prospective borrowers to have one.
But not all banks or financial institutions require debtors to take loan insurance services or credit insurance. There are those who make insurance as an additional option, but there are also those who make the service a must.
What is Bank Loan Insurance Service?
The loan insurance product at the bank or the term credit insurance is one of the insurance products that can provide guarantees to borrowers if they experience the risk of default by the debtor.
In this situation, the creditor is a financial financing party or bank, while the debtor is a person who makes a loan to a bank.
Risk What is meant here is when the debtor or customer fails to pay the loan installments, for example due to death or an accident resulting in permanent total disability.
The loans or loans that are guaranteed are unsecured credit products (KTA), home ownership credit products (KPR), and guarantees from motor vehicle ownership financing, such as cars.
In general, the way bank guarantee insurance works is simply the same as other insurance product services. If you already have loan insurance at the bank, you are still required to pay a premium. And usually, the premium value has been combined with installments from loan payments or when it has been paid off it is paid with Down Payment (DP) aka down payment.
Reporting from the Financial Services Authority (OJK), credit insurance products provide protection and also guarantee the repayment of credit recipients/debtors’ installments if:
- Having an accident or illness (naturally) to death.
- Have permanent disability accident so that they cannot continue to pay installments.
Types of loan insurance at the bank
The guarantee provided from loan insurance services at the bank is generally the same as life protection insurance, namely a guarantee in the form of life insurance money (UP) if the insured dies or is permanently disabled.
As for the difference, in life insurance services, this sum insured will be given to the heirs or given to the family if the insured dies and will be given to the insured if he experiences permanent total disability.
Now, for loan insurance services at the bank, if this risk occurs, the monthly loan installments will be closed or considered paid off.
Therefore, both the insured and the family left behind will be free from the burden of debt. To be clear about this credit insurance service, it’s good to see a review of the types of services.
- Types of Life Insurance.
Life Insurance is a bank loan insurance that will pay off You are at risk of bad credit or default due to the death of the borrower.
If the debtor dies, usually the rest of the loan will be borne by the heirs to continue the installments. With this, of course, it will be very burdensome for the bereaved family, especially if the heirs do not know that the debtor or deceased has a previously proposed loan.
This life insurance is usually recommended for debtors who are over 50 years old or approaching retirement age.
- Type of Insurance in the event of layoffs.
This is loan insurance that guarantees loan repayment if you are laid off from where you work. This insurance is highly recommended for debtors who are still contract employees in a company or agency.
- Types of Insurance for Default risk
This type of loan insurance is insurance that is devoted to the risk of default which will be a guarantee to pay off the loan if the debtor commits what is the default? Default is an error or violation committed by the debtor that is carried out intentionally even though it is due to negligence. Which results in the debtor not fulfilling his intention in paying debts or loan installments according to the agreement at the beginning.
- Types of Mortgage Insurance
You must have often heard of mortgage insurance. Mortgage insurance is a loan insurance product at a bank which provides guarantees for loans in the form of property purchases such as houses, apartments, or shop houses.
- Consumer Needs Credit Insurance
The protection provided from an insurance product of this kind is risk insurance for bank losses if the borrower fails to pay the debt installments. This type of credit, usually the source of funds for borrowing installment payments is deductions from the borrower’s salary or pension money.
- Working Capital Credit Insurance (KMK)
Protection or services provided during the insurance period for the risk of loss arising from the debtor or unable to pay off the disbursement of loans used for working capital for a business.
- Investment credit insurance
The protection or service provided by this type of insurance is medium/long term credit risk aimed at prospective debtors.
This insurance aims to finance the needs of goods and capital along with the necessary services including rehabilitation, renewal, expansion, establishment of new projects, or the transfer of projects being worked on.
This is a discussion article about Understanding Bank Loan Insurance and the types of bank loan insurance. Hopefully it can be useful for readers.