Installment protection insurance: does it make sense?
Is it worth a installment protection insurance?
For those who can not do anything with the word installment protection insurance, advance a brief information what this is all about. If you have a financing by installment payment, there could be unexpected situations during this time in which you cannot pay the installments on time. This can be an accident, illness or even temporary unemployment. Now you have two options in this situation: aim for deferrals or an installment hedge will step in for you.
A loan means a long-term burden
Let’s say you buy a property. You can pay most of the required sum immediately, but you have to pay off CHF 150,000 in the form of a loan in installments. If the term is not too long or the interest rate is not really small, this could mean a considerable monthly burden for you. At the same time, a burden that you really have to pay every month. If something should happen to you during the installment payments so that you cannot service the loan, you have a problem. In the most inopportune moments, you suffer blows of fate that you never planned for.
Unplanned scenarios can be: unemployment, an accident, a prolonged illness that leads to incapacity for work … There are a number of circumstances that make your everyday life so difficult that you are absent from work or that you have unplanned major expenses.
A rate hedge helps in this case
What can a rate hedge cover? If you become unemployed through no fault of your own or are temporarily unable to work, the monthly installments are secured and the insurance pays the payments. If you are permanently unable to work, as is unfortunately often the case after more serious accidents, the remaining debt is covered and will be covered by the insurance.
The insurance premium can be conveniently paid in at a monthly rate. That is a manageable amount and brings a certain feeling of security. With most providers, taking out rate protection is a straightforward affair and does not require a health examination. In addition, the installment protection can also be concluded retrospectively for current loans at any time.
Of course, this also has the disadvantage that any insurance company has. You might well never need to take out insurance. But as always, everyone has to weigh for themselves whether they want to invest in this feeling of security or not.