Ano nga ba ang loan redemption insurance or mortgage redemption insurance? Yung iba ang tawag dito ay credit life insurance. Iba iba po ang tawag pero iisa lamang ang gamit nito. It works for the benefit of the insured and the beneficiary dependent on what happens to an insured person as attached to his or her credit or loan.
Be definition, loan redemption insurance is actually a type of life insurance attached to a personal non collateral loan or a secured / collateral loan. This works for the insured person who had a loan with a bank, a financing company or a lending company (lender). The loan redemption insurance is attached to the loan. This acts as a protection to the beneficiary in case the insured dies. In cases where a disability occurs, the same insurance works. The only difference is that the insured lives and will be the one to redeem or claim the insurance.
The importance of a loan redemption insurance is that it helps give the insured or his/her dependents of beneficiaries protection. This protection is in terms of paying a loan in full in an event the insured dies or is rendered disable.
Basically, this works just like life insurance. The only difference is that LRI or mortgage redemption insurance is attached to a loan or mortgage either a house or a car or vehicle as collateral. Others may call it credit redemption insurance in a case where personal or unsecured loan is availed by the insured.
LRI works in times where anything happens to the insured. Loan redemption insurance also helps the beneficiaries or dependents to avoid distress selling of assets or collateral. This distress selling is also called as rush sale to avoid further bad financial impact to the ones left behind or in case the insured gets disabled.
Loan redemption insurance also helps assure the beneficiaries or dependents get an assurance that they will have a home to stay. This is in case the insured or breadwinner dies or gets permanently disabled and cannot afford to work to pay for the housing loan. This means that the loan gets fully paid and the asset will go to the beneficiary or dependent.
Take note that claim payout is a very important consideration. Read the time print of your contract to avoid losing money. There is a chance that your contract might have the claim payout to go fully to the lender or lending or financing company. You should make sure that part of the insurance claim will go to the dependent of beneficiary. This is because you can use this fund to augment to pay for the loan and whatever in excess will go to the beneficiary or dependent.
Just like when you are to travel from point A to point B, if you paid transportation cost to arrive to point B, it means that your payments is already used.
The same thing works for insurance. Paying for premiums is not redeemable if you do not die or do not get disabled as part of the agreement. Be thankful that you did get to your destination without any hazzards. Therefore, the premiums you paid is as good as paid as an expense to the insurance company.
This is where the company earns from just like any other services company. Insurance is for you and your assets protection. You pay for their respective insurance and in case of no claim, it means you should be thankful you either did not die or got disabled.
Basically truth in lending act works for the benefit of the loan borrowers. Here, the lending company, financing institution or bank must disclose all charges and where these charges go.
Non disclosure is punishable by law and if you ever encounter this type of scenario, please report to the right government agency or ask for a legal advice.
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