The number of loans taken by Kazakhstani people is growing every year, according to Ranking. Kz. In total, loans to private individuals reached KZT 4.7 trillion as of end of April 2018, which is 14% more than a year ago. Their share from the loan portfolio increased from 26.7% to 34.7%.
As a rule, families with a medium or lower medium income take such loans. Thus, in the event of such an unforeseen circumstance as, God forbid, death or disability of the borrower, the entire burden of financial debts lies on his family members’ shoulders. Or, in case of non-payment, the penalties will grow every month, immersing the family in a deeper debt hole. Therefore, in banks along with a loan agreement the borrowers sign contracts on private life insurance and work capacity.
The size of insurance payout is equal to the actual debt amount (principal debt) of a borrower before a credit institution at the moment of the insured event. The amounts of penalties, forfeits, fines for non-payment or late payment by the insured under the loan agreement are not included in the insurance payment.
In case of death of the borrower, the insurance payment is made in a lump sum, and in case of disability categories 1 or 2 as a result of an accident, the payout is made within the specified period of disability, according to the schedule of payments under the loan agreement signed with the bank.
In the life insurance companies’ practice there have been similar cases. One of the borrowers Bolat B., when registering a loan, concluded a life insurance contract for a period of 4 years with the insurance amount of KZT 2,000,000. But two years later he passed away. The remaining amount of the principal debt under the bank loan agreement as of his death was KZT 1.47 mln. According to the insurance contract terms, in the event of death of the insured, his heirs are the beneficiaries. The insurance amount was divided among them for further payment of the debt.
In the second case, the insured borrower Anatoly S. was diagnosed with disability of category 2 for one year due to a general disease. His insurance amount was 1.4 million tenge, the insurance contract term was 4 years. But he received this disability approximately six months before the end of the contract. The insurer was making payments, according to the schedule of payments under the loan agreement. The amount of payment was 44 060 tenge. This amount was paid on a monthly basis by the insurer to the bank for the customer by the end of the loan agreement term.
These real life examples confirm the significant role of life insurance in the loan arrangement. The insurance policy will come to the rescue in a difficult situation. For the bank, this is a reliable protection of the loan portfolio from default by reducing losses caused by death or loss of ability to work of the borrower. And for the bank’s customer, it is a guarantee of loan repayment and family tranquility. When making a contract, the program automatically calculates the cost of insurance, depending on the insurance coverage and the term. The amount of insurance coverage is equal to the loan amount. The insurance coverage becomes effective from the moment of insurance contract signing and the insurance premium payment.
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