Insurance policies do not only exist against accidents, theft and accidental damage to people and property. Debts can also be insured. With credit insurance, also known as residual debt insurance, debtors or the bereaved are rid of all worries. The risks of death, unemployment and incapacity to work can be covered with credit insurance. The insurers also offer combinations of the three dangers mentioned. Credit insurance is therefore a special form of risk life insurance.
Protection comes at a price
Credit insurance is not in vain. For example, if you take out an installment loan and want to add credit insurance, the costs can skyrocket. Experts have shown that the amount for credit insurance can more than double the pure interest payment. Therefore, a degree can be quite expensive. In any case, the comparison with other providers is worthwhile. You should mostly keep your distance from the policies of the banks. Insurance offered there is usually too expensive. A number of well-known insurance providers offer credit insurance on favorable terms.
When does a degree make sense?
If you want to generate a permanent value with a loan, credit insurance makes sense. This is the case, for example, when buying a property. However, if you only want to finance your next vacation with an installment loan, you can do without such a policy. Once a trip has been made, no bank can takeit away. You should also pay attention to the small print when it comes to the size. The policies that come into effect when you die are mostly useful. So the heirs are not burdened by debts. This protection makes sense especially when buying a property or other permanent assets. But when it comes to unemployment and inability to work, the degree is usually not worth it. Experts and Stiftung Warentest advise against such policies. Insurers usually bind a liability to pay to numerous conditions. For example, one year of previous employment is required for unemployment protection. Many insurers only pay after three months and often limit their amounts to one year. With occupational disability protection, previous illnesses often lead to refusal to provide benefits.
Conclusion: who needs credit insurance?
Before taking out credit insurance, a cost-benefit analysis should be carried out. Since the costs can explode, they represent a great burden. Those who have little financial leeway anyway through the monthly payment in installments can do without such a policy. In the event of insolvency, the path to personal bankruptcy often seems to make more sense. The restrictions in the area of disability and unemployment do not make a degree attractive. Only protection in the event of death is protection for surviving dependents for objects of existential importance. For example, a property can remain in family ownership.