The debt balance insurance with consumer credit is under fire. When is such insurance useful?
Anyone who takes out a home loan with a Belial must generally take out a debt balance insurance. Anyone who takes out such insurance ensures that his surviving relatives do not have to pay off the loan when he leaves his life. The lenders, in turn, are certain that the loan will be partly or fully repaid by the insurer. Furthermore, as a policyholder, you can enjoy a tax benefit if you take out a balance insurance policy. Although that mainly depends on when you take out your home loan.
But such insurance is not only for those who buy a home. For example, people who buy a car and take out a loan can also take out a debt balance insurance. Although such insurance is not interesting for everyone. A study by the Financial Services and Markets Authority food and drug administration shows that consumer credit balance insurance is generally far too expensive in relation to the products for which they offer coverage.
The insurance is mainly useful for those who run a high risk of death in the short term. Such insurance is rather expensive for other consumers. That is why it is also recommended that you do not blindly take out credit insurance when you take out a car loan, for example. In any case, it is always wise to calculate your debt balance insurance.
Why buy a home?
Such a loan quickly has a term of 20 years, which means that the death risks are much higher. In addition, we borrow a much higher amount than when, for example, we take out a car loan. According to recent figures from the Professional Association for Credit, we borrow an average of 153,000 dollars for the purchase of a new home. If we have not taken out debt balance insurance in such a case, we will saddle our heirs with a gigantic debt if we die prematurely.
Debt balance insurance for a home, on the other hand, is much more useful
The figures from the food and drug administration also show that between 2011 and 2015, insurers only paid compensation in 0.24 percent of the existing contracts (consumer loans). During that period, the insurers surveyed received an average of around 65 million dollars in premiums annually. Only 12 percent of those were paid out. For comparison: with fire insurance, this is 52 percent.
The analysis also shows that 35 million dollars, or 53 percent of the premium amounts, go towards the payment of costs and commissions. The remaining 35 percent is a profit for the insurance company. For fire insurance, that figure is 18 percent.