December 16, 2010

Almost Always Waive Life and Disability Insurance Clauses on Loans

When you borrow from financial institutions, they systematically offer you life and disability insurance to «protect» your mortgage or loan.

It might be wiser to waive these insurance clauses and thereby avoid paying «small» supplements.

Indeed, most of the time, loan insurance clauses are simply not beneficial to you.

Less Expensive Possibilities

You need to check and compare it with other options available to you. But in most cases, it’s possible to obtain similar protections cheaply.

Thus, Group Insurance available through your job is often interesting and can fully cover your insurance needs at a low price. There’s absolutely no point to have double or triple coverage; you’ll probably only get paid once anyway.

In addition, it is always advisable to combine coverage on a single contract to avoid undue administrative costs.

Typical Features You Should Know About

Decreasing Coverage, Invariable Premiums

We should also consider that life insurance coverage on loans if often decreasing because it only covers the loan balance, which usually goes down with time.

However, premiums will probably stay the same or only be adjusted at renewal.

Restrictive Disability Insurance

Similarly, disability insurance is sometimes quite restrictive.

For example, chances to claim something are not always that good in cases of partial disability. If you are still able to perform any type of work, you may not get paid even if your disability prevents you from working at your old job.

Accident insurance is even more restrictive, for this type of insurance, definitions and conditions of an accident are so specific that probabilities to qualify are almost non-existent.

An Easy Way To Save Money

Initially, loan insurance clauses may look like a good deal since premium amounts appear to be cheap.

In fact, these loan insurance extras are pretty profitable for financial institutions. They often promote sales of such products by offering bonuses to their employees.

So beware, don’t count on lenders to always give you the right advice.  And remember to avoid gimmicks and unnecessary extras.

As months go by, these small amounts will accumulate and could eventually represent substantial savings for you and your family.

Exceptions That Confirm The Rule

Nevertheless, loan insurance clauses may be beneficial in some exceptional cases. Like for people too sick to be insurable or that have no group insurance at work.

So ask around and compare!

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