When banks or financial institutions provide loans to debtors (people who make loans), there is certainly a risk, right? For example, the risk of default is due to the debtor’s death. Such an event is definitely unavoidable. Therefore, the bank or loan institution must anticipate it.
How? Of course transfer the risk to other parties, namely insurance companies. There is such thing as credit insurance, which is protection against the risk of debt default.
When an undesirable thing happens to the debtor that results in default, the insurance company will replace or pay off all debtor debts to the bank or financial institution.
Like other insurance, of course there are premiums. Therefore, any loans provided by banks or financing services are usually included in insurance. But there are also optional ones where the debtor (borrower) must buy this insurance package.
Come on, see how important this credit insurance, benefits, and how to register.
Reasons Why Credit Credit Is Important
Credit insurance provides protection so that loan repayments can remain paid off despite unexpected risks. The risks borne are death, permanent disability, and layoffs at the debtor. So, heirs do not need to bear or be liable to pay off credit debt.
Credit insurance provides dual protection, both for creditors or lenders and for heirs left by debtors or recipients of debt.
It should be noted, credit insurance is not a way out to avoid payment or repayment of debt. The insurance company only covers the risks that have been regulated in the credit insurance membership certificate.
If your credit insurance is rejected, the creditor will still ask you to pay off the debt despite having to confiscate your assets. However, this step is still regulated in the corridor of applicable law.
To avoid rejecting claims from credit insurance companies, there are a number of important things that you must understand and know. In order for the heirs to not be confused because they have to bear a variety of risks they may not be able to bear it if you die, permanent disability, or lose your job so you cannot complete your obligations.
Important Things to Look For When Taking Credit Insurance
Like an insurance that provides protection, sometimes there are also claims that are rejected for various reasons. To avoid refusing credit insurance, there are a number of things you need to pay attention to as discussed below:
- Participants must complete SPPAJ (Application for Life Insurance Closing) in full, honest and correct.
- Request proof of membership certificate to the insurance company through the lending bank.
- Learn the benefits, duration of coverage, and exceptions to the membership certificate.
- Inform the heirs about credit debt and participation in credit insurance.
Some of the reasons for submitting credit insurance claims rejected by insurance companies are as follows:
- Information in the SPPAJ (Life Insurance Closing Request) is not in accordance with the actual condition and medical history
- Requirements for submitting claims are not completed
- The insurance period has expired
Also keep in mind that there are some exceptions in credit insurance that need to be understood. The following are some of the risks not covered by this insurance:
- Nuclear reactions or the like that make the debtor’s business fail and affect their ability to pay their obligations
- Political risk that causes the failure of the debtor’s business
- Legal actions taken by the government against debtors have an effect on the ability of debtors to repay their loans
- Natural disasters
- As a result of errors or omissions from banks or financial institutions that provide credit
How to Apply for Credit Insurance
The following is a guide to registering for credit insurance:
- Register through the lending bank
- Fill in the Application for Closing Life Insurance (SPPAJ)
- Pay premiums in accordance with the terms of credit insurance
- Proof of credit insurance is not in the form of a policy but rather a membership certificate from an insurance company
For the debtor himself, there are separate provisions that must be met. Debtors received by insurance companies as insured objects are those aged 20 to 64 years. With an estimated age of 65, the debt can be paid off.
Now, you can check again whether your loan has credit insurance or not. Meanwhile, for those of you who are planning to borrow, it’s good to consider this insurance in your loan package. Because, usually there are banks or financing services that have completed your loan contract with insurance, some are optional.
Of course you do not expect anything bad but there is nothing wrong just in case, right? Indeed credit insurance adds to your borrowing costs, but the benefits far outweigh your premium payments.
You and your family can be much calmer. If you die or cannot work due to total permanent disability that results in default, the family will not be billed by the bank.