When you take out a loan, you undertake to repay the amount of money at a certain point in the future. Whether you start paying off immediately or prefer to wait a while, you must ultimately ensure that the borrowed money is repaid. Although you may prefer not to think about it, you may die in the meantime. You can take out insurance during the loan to ensure that your surviving dependents do not have to pay for the loan in that case.
The debt balance insurance
One of the most common forms of insurance when taking out a loan is the debt balance insurance. You enter into an agreement with the insurance company that ensures that the remaining balance will be paid if you die prematurely. You can choose to have the amount still to be paid in one go, but it is also possible to have this done on the basis of an annual premium. Moreover, you are free to the extent that you are insured against the debt balance, which means that it is also possible to have part of the debt repaid by the insurer.
The debt balance insurance is generally made mandatory by the providers of a mortgage loan. As soon as you take out a mortgage, you incur a substantial debt, which must be repaid when you die prematurely. With the help of a balance insurance policy, you ensure that the insurance company will compensate the lender for the loss that is made possible. You therefore pay a premium when you take out a mortgage, which is intended to pay off any outstanding debts when you die.
The mixed life insurance policy
In addition, you can opt for a mixed life insurance policy, which will not only pay out in the event of your death. You can choose to have it paid out during the term of the loan when you die, but also to pay it out at the end of the term, even when you are still alive. You actually choose to take out a life insurance policy, which will also pay out when the loan is still running and you unfortunately die. It is wise to take a good look at the tax benefits of the various variants when you take out a loan.