Credit insurance is one of the methods to protect borrowers from repayment risks. Such types of insurance protect the borrower's property from the imposition of penalties in case of non-fulfillment of obligations under the loan agreement, and are also able to protect relatives from transferring debt repayment obligations to them in the event of the borrower's disability or death. “First of all, it is a financial cushion against unforeseen situations related to the life and health of the borrower. A loan is usually issued to the breadwinner of the family, the one who has an income. If something happens to him, the entire burden, including financial, will fall on the shoulders of family members (wife, children, parents). Insurance contract upon loan receipt protects the borrower and his relatives releasing them from the obligation to repay the loan, the debt to the bank will be closed by payment from the life insurance company,” explains Ramai Kurbangaliyev, Executive Director of JSC LIC Nomad Life.
Credit insurance is an important step for a borrower, as life is unpredictable and the borrower may face various problems that may lead to inability to repay the loan. It is better to reduce risks so as not to end up in a very difficult situation later, financial experts believe.
“Another advantage of the program is the fact that, with insurance coverage, the loan will be issued on the terms of a partnership program operating between the bank and insurance company. In this case, the terms of the loan will be softer for the client,” the source clarifies.
Bank employees offer customers a choice of a loan agreement without insurance and an agreement that involves the purchase of a life insurance policy. “Such a policy seriously increases the financial security of a person and his family. And one can realize the significance of this option only when an insured event such as death, disability, or loss of ability to work comes. The cost depends on the term of insurance, insurance coverage (i. e. the amount of the loan) and conditions under which the insurance company has an obligation to pay out; they can be insurance in case of death for any reason (including diseases) or due to an accident, disability, loss of ability to work, etc. It is possible to choose one option or combine two or more, the more coverages are selected, the higher the cost of insurance,” says Ramai Kurbangaliyev.
What does credit insurance cover?
Consumer loan insurance provides financial coverage to the client and guarantees to banks, which, of course, are interested in the loan being repaid in full.
The fact that credit insurance works and works well has been proved during the pandemic to many Kazakhstani families. “During the pandemic, the number of insured events and insurance benefits increased significantly. Thus, for the period from 2014 to the start of the pandemic, our company has paid out about 140 million tenge to borrowers by type of insurance, and from 2020 to the present day, the payouts have already exceeded 500 million tenge,” Ramai Kurbangaliyev gives the statistics data.
Credit insurance is an important step in minimizing risks, as you can never be sure what might happen tomorrow. It should be reminded once again that when signing such an insurance agreement or any other contract, do not forget to carefully read all the conditions.
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