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When applying for a loan, the financial institution can offer you a credit insurance that, basically, serves to protect you against any unforeseen default . That is, if the case arises that in a month you could not face the payment of the loan, being additionally paying a small additional amount for credit insurance, the loan or part of it would be covered.
The credit insurance is a way to protect your back and serves as a preventive measure, although it is always advisable to do the accounts and have proper financial solvency before asking for any credit or loan to a financial institution, although there are natural contingencies impossible to avoid (accidents, unemployment, death …).
It is important to note that credit insurance is an optional product , that is, the customer chooses whether he wants to acquire it or not . It is totally forbidden by the credit companies to add it to the credit without prior notice, that is, without consent or in a deceptive manner for the client.
Types of credit insurance
There are four types of credit insurance depending on the nature of the unforeseen:
- Life insurance: covers the rest of the loan payable in case the requesting client dies. Otherwise, family members must face the rest of the payment.
- Health insurance and accident : if an unexpected disability or accident prevents the client from doing their job.
- Unemployed unemployment insurance : either by a layoff or downsizing, the insurance will protect the loan payable.
- Property insurance in credit guarantee : in which the real estate or assets that have served as collateral to obtain the loan have suffered some unforeseen damage, theft, fire, etc.
When applying for a loan or credit, you can purchase all or some of the types of credit insurance that we have mentioned.
What aspects should I take into account to assess whether I should choose it or not?
The client requesting a loan or credit is the one who must consider whether or not he needs some of these credit insurance .
Similarly, the final rates to be paid should be taken into account , since they will increase significantly with respect to an uninsured quota.
To carefully assess whether or not to choose a credit insurance, consider:
- The final price of the fee or fee, as well as the total loan along with the chosen insurance
- If the credit insurance will be paid in installments , not in a total
How would the credit installments without the insurance
- If the insurance covers the entire loan
- Limits and exclusions of credit insurance (what it covers and what does not)
- Can you remove or cancel the insurance before canceling the loan? Yes, it is more, in article 83.A of the Law 50/1980 of the Insurance Contract , it is affirmed that the client has a maximum of 30 days to notify of his withdrawal of desire to pay and enjoy credit insurance, without that the credit company can refuse
- If the insurance covers the guarantor
- And, most importantly, if the credit insurance they offer me is mandatory or is hidden in small print. If so, run away, and even report
Watch out! Credit insurance is not mandatory nor can you impose it
All credit insurance is voluntary . The customer chooses whether he wants it or not.
Moreover , this is protected and governed by Article 5.2 E of Law 26/2006 on private insurance and reinsurance mediation, which states that: “Private insurance and reinsurance intermediaries may not directly or indirectly impose conclusion of an insurance contract. “
On the other hand , it is very advisable and responsible to opt for a credit insurance , since it safeguards you against any serious unforeseen event (death, accident, unemployment …), which prevents the payment of the loan, without affecting relatives or relatives.
Never a credit insurance must be imposed or forced to be able to enjoy the credit, and much less, hidden or put in a deceptive manner. All these fraudulent actions by a financial institution will be denounced and sanctioned by law.
Finally, if the loan is mortgage and is securitized, it is recommended to take out a credit insurance for possible damages to the mortgaged property, this insurance being paid either by the bank or by the client, thus protecting the property against damage of third parties.