Because what happens if the principal borrower loses his job, his capacity or his life suddenly falls? Of course, all debts will immediately pass on to the borrower’s family shoulders or their common property.
But not everything is as sad as it may seem at first, because when applying for a loan, the client can also order life and health insurance. It is this kind of “financial security pillow” that allows borrowers to sleep peacefully at night and not to worry about the future of their family.
If you are a regular consumer credit borrower
Then you are not really familiar with life insurance when you take out a loan. Life insurance is usually applied for by getting a mortgage or other loan to buy a property or machine.
Statistics show that most people in Latvia are not aware at all that obtaining a loan may also require the borrower to apply for life insurance . In addition, research from Swedbank in 2016 indicates that more than 1/3 of Latvian residents do not think about their life insurance at all and do not consider this procedure necessary. To compare these figures to the same figures in other countries, it is sufficient to add that in Lithuania only 6% of the population has never considered the possibility of insuring their health.
By credit insurance, we mean first and foremost the life, work and health insurance of the principal borrower. Large sums of money borrowed as a mortgage or consumer loan are always linked to the realization of a dream come true (purchase of a car, home or building a home). But rarely do any of the borrowers think at the moment of receiving the loan that they may soon have an accident or other event that will cause them to lose their ability to work. Any disease in this case seems distant and unrealistic. But it is at these moments that it is worth thinking about your family and protecting it and yourself, as well as keeping yourself calm throughout the loan repayment period.
Why insure loans?
Credit insurance is voluntary and may not be required. But without this financial “pillow,” the risk of not paying off your mortgage and losing your home is significantly increased . Especially if the borrower is the main “breadwinner” of the family. If he is suddenly incapacitated, other members of the family will be unable to repay the loan in his place and the property will be transferred to the creditor.
Let us use the figures of E-Money bank and the insurance company ERGO as an example. According to their records, there were 20 accidents last year, which resulted in just as many families being left without their only “breadwinners”. But in these cases, it was the insurance that was designed for the life and health of the principal borrower that helped pay off the mortgage and leave the property in the family.
In further research, both companies found that out of 100% of people who insured their lives, 63% were men and 37% were women. Progress has also been made in terms of the number of people insured. Since 2016, this number continues to grow: ordinary citizens, not just bank borrowers, increasingly want to insure their well-being, as well as the amount of money they make as insurance premiums. It is precisely in the light of these trends that financial experts have come to the conclusion that the people of Latvia have begun to adopt habits that allow them to save money and plan their budgets in the long run .
How to Insure a Credit
Life and health insurance is offered by almost all major Latvian banks. Many official sites have an online insurance calculator that helps you determine the amount of your insurance payment depending on how often you pay for the service: monthly or in a single payment. Other factors also influence the amount of the insurance premium:
- Amount of credit.
- Due date.
- Risks assigned to the borrower.
- Age of the borrower.
- Client’s health condition.
Also, be prepared that you will be able to obtain large amounts of credit for the long term repayment period, which means that the amount of insurance will also be much higher.