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Why is Mortgage Life Insurance beneficial?

Mortgage insurance is an important point when obtaining a loan to buy a home, as well as throughout the entire period of its payment. Creditor banks oblige the borrower to insure a whole package of risks, since anything can happen to bank clients and their real estate over the years. The package usually includes insurance of subject of mortgage, that is, housing, life and health of the borrower, title insurance can also be offered.
Why is Mortgage Life Insurance beneficial?

“Life insurance of the borrower is the purchase of insurance coverage to pay off debt on loan in the event of unforeseen circumstances that may affect the ability of the borrower to repay the debt. The main advantage is that insurance provides financial security for loved ones by paying off the balance of the mortgage in the event of disability or death of the borrower. In this case, insurance protects the interests of the citizen, and the housing purchased with a mortgage remains the property of the borrower or their heirs,” commented Oleg Khanin, Chairman of the Board of LIC Kommesk-Omir.

Such insurance is also lucrative for the bank, since the borrower's life insurance policy guarantees the bank that if something happens to the borrower, material damage will be compensated.

Insurance case

The following events under the borrower's insurance program are most often considered as insurance:

  • death of the insured as a result of an accident occurred during coverage period;
  • confirmation of the 1st or 2nd group of disability of for the insured as a result of an accident that occurred during the period of validity of the insurance coverage.

“Insurance benefits will make it easier to endure hardships and sorrows, saving family members from a number of everyday difficulties. In the event of the death of the insured person, payments are made in favor of the creditor bank, repaying the loan. Along with that, insurance organizations offer a choice of additional coverages, not limited to the death of the insured, including loss of capability for work, in the event of accidents, and disability. In case of such events, the insurance company makes payments in the amount of the insurance coverage provided for by the contract,” stresses Galym Amerkhodzhayev, Chairman of the Board of LIC Standard Life.

The cost of insurance is individual for each LIC client. It depends on the loan amount, the term of insurance and insurance coverage.

“The main goal of life insurance for borrowers is that when buying a life insurance policy, the borrower saves them and their families from paying debt to the bank in unforeseen or unfavorable situations, especially if the insured is the sole breadwinner of the family,” the press service of LIC Eurasia reminds once again.

Highlights to be noted

“If the bank has a well-thought-out insurance program, insurance coverage for typical situations is already provided for the client. However, the main coverage under the policy is the onset of a situation when a person is unable to pay the loan in the event of disability or in the event of death. The policy may provide additional coverage, for example, the establishment of disability. When applying for a mortgage loan, insurance will obviously not be superfluous if the client plans to borrow a large amount from the bank, for example, from several million tenge. It is important to remember that insurance is not imposed; but if the client refuses to buy an insurance policy, the bank has the right to offer other lending conditions,” explains Andrey Dzheksembayev, Deputy Chairman of the Board of LIC Halyk-Life.

When applying for a policy, it is necessary to carefully and in detail study the terms of the insurance contract. It is important to have a clear understanding in which cases the contract provides for an insurance benefit, and in which cases it does not, in what terms and how the insurance benefit is paid. To avoid unpleasant surprises, it is very important to clarify the conditions for terminating the life insurance contract of the borrower in case of early repayment of the loan. This will help to avoid misunderstandings between the company and the insured borrower in the future.

How to buy

“When deciding to take out a large loan from a bank that is in partnership with LICs, it is necessary to determine the insurance amount that will cover the remaining mortgage loan in the event of the death or disability of the borrower. Then the life insurance application is sumbitted. It can be made online. This application may require personal data of the client, information about their state of health. Depending on coverage amount and age of the borrower, it may be necessary to undergo a medical examination or take tests,” says Azamat Yerdessov, Chairman of the Board of LIC Freedom Life.

The experts recommend analyzing the insurance risks included in the insurance policy. “Next, it is necessary to compare insurance rates on the market so that there are adequate conditions. This is very important so as not to overpay the bank, which can use insurance programs with higher rates. Thus, comprehensive insurance coverage with adequate insurance rates minimizes the borrower's losses in case of an insured event,” Andrey Dzheksembayev explains.

“It is possible for the insured to undergo a medical examination on the basis of underwriting. This can be filling in additional questionnaires by the insured on such by illness, by profession and leisure, and a financial questionnaire,” says Oleg Khanin.

For small amounts (up to five million tenge), underwriting usually occurs automatically - on the basis of a questionnaire filled out by the client, and for large amounts, the insurance organization may ask the client to undergo an additional medical examination. “Underwriting usually does not take long; within a couple of days after the insurance organization receives all the necessary documents the client receives a response from the insurer. If the answer is yes, the contract is signed almost immediately,” concluded Galym Amerkhodzhayev.

Further, LIC specialists conduct a risk assessment and decide on the conclusion of an agreement with the client. With a positive decision, an agreement is concluded, where all the conditions of insurance are prescribed and a one-time insurance premium is made. In online insurance, the insurance policy is issued electronically and sent via SMS.

Photos are from open sources.

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