What is Disability Insurance for Personal Loans and Lines of Credit?
Disability Insurance for Personal Loans and Lines of Credit is a type of payment protection that will make payments to your existing loan or line of credit for a specified period of time should you become disabled and unable to work. This coverage offers short-term protection, generally for 12 to 24 months depending upon the insurance plan.
Here’s an example of how Disability Insurance for Personal Loans and Lines of Credit works:
When Nick’s friend became temporarily disabled in an accident and was not able to make monthly payments on his personal loan, the family car was repossessed. That’s because Nick’s friend, like nearly one-third of Canadians today, did not have enough rainy day savings to cover even one month of expenses.
So when Nick borrowed $40,000 from his financial institution to buy a car for his own family, he decided to purchase Disability Insurance on his Personal Loan as part of a bundle that included Life Insurance and Critical Illness Insurance. “I wanted to have a safety-net,” he told friends.
Nick was comforted by the fact that should he be unable to work due to a short-term disability, the regular payments of principal and interest on his insured loan and the applicable insurance premium would be paid for a designated period of time – usually starting after a 30- to 60-day waiting period, and continuing for up to 24 months.
What medical conditions qualify for a Disability Insurance Benefit for Personal Loans and Lines of Credit?
The typical Disability Insurance policy for Personal Loans and Lines of Credit will cover you for an injury, disease, sickness, mental illness, or nervous disorder that prevents you from performing the regular duties of the occupation you were working in before your disability started.
How long does Disability Insurance for Personal Loans and Lines of Credit cover you?
Benefit payments on your insured loans and lines of credit will start after an initial waiting period (either 30 or 60 days after you were diagnosed depending upon the financial institution), and will continue until you go back to work or until you reach a designated maximum period of time – usually 24 months.
What is the benefit that will be paid by Disability Insurance for Personal Loans and Lines of Credit?
Should you be unable to work due to a disability, the regular payments of principal and interest on your insured loans and a percentage of the outstanding balance on your lines of credit will be paid, and typically any applicable insurance premiums on those debts will also be paid.
Conditions can vary, but Disability Insurance for Personal Loans and Lines of Credit is usually available to people who are residents of Canada and between 18 and 70 years of age, if they apply within 30 days of the loan being funded.
How do I get approved for Disability Insurance on Personal Loans and Lines of Credit?
In most cases, health questions and medical examinations are not required to obtain Disability Insurance on Personal Loans. For Disability Insurance on Lines of Credit, if the total lines of credit you wish to insure amount to $100,000 or less, in most cases you may not be required to answer any health questions and coverage will be automatically approved. For Disability Insurance on Lines of Credit where you wish to insure more than $100,000, you only have to answer a few health-related questions and no medical examination is required. If you answer ‘No’ to the health questions and your line of credit is below a certain limit (usually $300,000), you’re usually approved. Answering ‘Yes’ to any of the health questions does not necessarily mean you won’t be approved; it simply means the insurer will contact you for more details.
How much does Disability Insurance for Personal Loans and Lines or Credit cost?
The cost of Disability Insurance for Personal Loans and Lines of Credit is determined by your age at the time of application, the size of your insured loan balances, and your minimum monthly loan payment. Personal Loan Disability Insurance is typically sold as part of a bundled product that can also include Life Insurance and Critical Illness insurance on your loans or lines of credit. All types of credit protection insurance coverage, including Disability Insurance, are provided under a group policy rather than being individually underwritten. This means more Canadians can be insured at economical standard group rates.
A number of banks and credit unions in Canada, including most CAFII member financial institutions, offer Disability Insurance for loans and lines of credit. Employees at CAFII member institutions are trained and knowledgeable about the products they sell, and they can be conveniently reached in branches or at call centres. You can find a list of CAFII member institutions at: https://members.cafii.com/index.php/members_voting.
