Have you ever wondered what happens if you have an unpaid loan and become unemployed? The answer is simple: Credit-related unemployment insurance is activated, which is covered by the provision of credit protection insurance by financial institutions. Learn more about this mode, which is usually a condition required by banks to extend credit.
Financial institutions are willing to lend to their customers and, as such, seek as much as possible to reduce the risks they inevitably take. That is why they set some specific requirements in certain cases.
For example, they may limit the repayment term of credit if the customer is already old and the amount of credit requested is too large.
They may require a guarantor, as is the case with mortgage loans, and may also require insurance such as life or credit protection, which may function as unemployment insurance.
This is an insurance that can benefit both parties to the credit agreement and is applicable in situations where the client is unable to work temporarily or becomes unemployed after having been employed.
How does unemployment insurance work?
Unemployment insurance is contracted at the time the loan application is formalized. Take Thomas’s example: You have applied for a $ 5,000 loan to repair your home for repayment within 24 months.
It turns out that, when nothing predicted him, Tomas lost his job. In addition to the fixed accounts, there was still a monthly payment of 230 dollars to pay.
Having the unemployment insurance associated with your credit, the current loan is something that Thomas will not have to worry about, so he can rest more on his fixed expenses until he finds a new job opportunity.
Pay attention to the specific contours of each credit agreement.
Unemployment insurance is a great asset for both the creditor and the client as it ensures that credit is paid in the event of involuntary unemployment. However, as with everything in life, this insurance has its limitations and you should be careful not to be caught off guard.
Monthly installment only covered up to a certain amount
As a rule, unemployment insurance ensures that the monthly benefit is paid up to a certain limit. Imagine that, in the case of Thomas, the maximum limit is 1500 dollars. This means that the insurance will not cover a monthly installment exceeding this amount.
There may be associated deductible
Unemployment insurance is activated after a certain period of time, and it is usually only from the 60th day that you can do so. In addition, the coverage extends to six months, and in some financial institutions it is possible to renew up to twice, ie up to 18 consecutive months.