When taking out a consumer unsecured loan, bank loan officers often recommend purchasing loan insurance. So, what is loan insurance? What benefits does it provide to customers, and is it mandatory? The following article by TOPGOVN will address these questions in detail. Let’s take a look!
What is Loan Insurance?
Loan insurance is a type of insurance product designed to ensure that an unsecured loan will be repaid even if the borrower is unable to do so. This insurance typically covers situations where the borrower suffers permanent disability or death.
Loan insurance is frequently recommended by bank staff for unsecured loan contracts. Each bank has its own regulations regarding loan insurance, which is generally applicable only to unsecured loans.
When purchasing loan insurance, customers are protected, which can significantly alleviate the debt burden on their families in the event of unforeseen incidents. The insurance company will repay the loan on behalf of the customer, providing peace of mind for both the customer and their relatives.
Is Loan Insurance Mandatory?
Loan insurance is not mandatory. In the context of unsecured loans at banks, loan officers may suggest loan insurance, but customers have the choice to purchase it or not.
This insurance operates on a voluntary basis, representing an agreement between the customer and the financial institution. Although voluntary, loan insurance can improve a customer’s credit score during the bank’s assessment process. Hence, opting for loan insurance can be seen as a sign of the customer’s credibility to the bank.
Conditions for Participating in Loan Insurance
Participating in loan insurance is quite straightforward, requiring you to meet the following criteria:
- Be a Vietnamese citizen with full legal responsibility.
- Be between the ages of 20 and 60.
- Have a loan approved for disbursement by a financial institution or bank.
- Have a loan amount ranging from VND 10,000,000 to VND 500,000,000.
How to Calculate Unsecured Loan Insurance Fees
While any loan can include insurance, unsecured loans generally involve higher risks and thus may incur higher insurance fees compared to other loan types. Each bank applies different rates, but typically, loan insurance fees range from 3% to 6% of the loan amount.
For example, if you take out an unsecured loan of VND 100,000,000 with a 5% insurance fee, the insurance cost would be VND 5,000,000.
Benefits of Participating in Loan Insurance
Loan insurance is considered a risk mitigation solution that enhances the reliability of your bank loan. It offers numerous practical benefits for customers. If unexpected risks occur, the insurance company will assess the situation and repay the loan on behalf of the customer. This can make it easier for your loan application to be approved, as loan insurance can boost your credit score.
Thus, loan insurance provides significant benefits to customers. You might consider purchasing loan insurance from banks for your loans to ensure the best possible protection.
Can Loan Insurance be Refunded?
Despite being non-mandatory, many customers wonder whether loan insurance fees can be refunded after purchase. The answer is that loan insurance fees are non-refundable if the customer encounters risks such as accidents or disappearance.
However, there are circumstances where loan insurance fees can be refunded:
- If the customer’s debt is less than the amount covered by the insurance company, the insurance will pay off the loan, and any excess will be refunded to the customer.
- During the contract period, if either party wishes to terminate the contract:
- If the customer requests termination: The insurance company must refund 70% of the remaining insurance fee.
- If the insurance company requests termination: The customer is entitled to a 100% refund of the insurance fee.
The refund amount will be specified in the insurance contract. Typically, customers will receive a partial refund based on the remaining term of the contract.
Conclusion
The article above has explained what loan insurance is and provided essential information about this product. We hope this information helps you make an informed decision about whether to purchase loan insurance. Best of luck!
