What is Life Insurance for Personal Loans and Lines of Credit?
Life Insurance for Personal Loans and Lines of Credit helps protect your family or dependants by paying out the outstanding balance of your personal loans and lines of credit (up to the maximum specified in the certificate of insurance) in the event of your death. There is a maximum amount of debt than can be insured – typically Personal Loans up to a maximum of $150,000, and Lines of Credit up to a maximum of $250,000 to $750,000.
Who can apply for Life Insurance on Personal Loans and Lines of Credit?
Life Insurance on Personal Loans and Lines of Credit is available for consumers who have a borrowing relationship with their bank or credit union. A maximum of two borrowers can usually be insured per loan, and they can typically purchase the insurance while they are between 18 and 64 years of age (coverage usually continues until borrowers turn 70 or choose to end their coverage). While pre-existing health conditions are usually excluded from coverage during the first 12 months, a claim in the first 12 months resulting from a condition that is not pre-existing is eligible to be paid. And Life Insurance on Personal Loans and Lines of Credit typically covers all health conditions after the first year.
How do I get approved for Life Insurance on Personal Loans and Lines of Credit?
In most cases, health questions and medical examinations are not required to obtain Life Insurance on Personal Loans and Lines of Credit. For example, if the total amount of the Personal Loans and/or Lines of Credit you wish to insure is $100,000 or less, you may not be required to answer any health questions and coverage will be automatically approved. For situations 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 loan or line of credit is below a certain limit (typically $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.
Tonya and Bob have been approved by their bank or credit union for a $30,000 personal loan to purchase a car. Should one of them pass away before most of the car loan is repaid, the surviving spouse may find it difficult to continue making the monthly payments on the loan.
So Tonya and Bob purchase life insurance on their personal loan. In the event that one of them passes away, the insurance will pay out the outstanding balance on their insured loan (up to the maximum specified in the certificate of insurance), making it more likely the surviving spouse can keep the car.
Tonya could just have insured her life for the loan, but since both spouses are working and contributing to the household finances, she wanted Bob’s life to be insured, too. And insuring two people on the same loan is a better deal, as premiums for the second person are usually 30% to 50% less than for the first person.
How much does it cost to buy Life Insurance on my Personal Loans and Lines of Credit?
The cost of Life Insurance on your Personal Loans and Lines of Credit will be determined by your age and the amount of coverage you obtain. All types of credit protection insurance coverage, including Life Insurance for Personal Loans and Lines of Credit, are provided under a group policy rather than being individually underwritten. This means more Canadians can be insured at economical standard group rates.
Where can I buy Life Insurance on my Personal Loans and Lines of Credit?
Many banks and credit unions in Canada, including most CAFII member financial institutions, offer Life Insurance on Personal 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. In addition, you’ll find that the terms and enrollment process for Life Insurance on Personal Loans and Lines of Credit are relatively straightforward. You can find a list of CAFII member institutions at: https://members.cafii.com/index.php/members_voting.