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It covers loan repayments if a borrower cannot make payments due to death, disability, or loss of employment.
Lenders offer two types of coverage: term insurance and critical illness insurance.
Term plan repays in the form of a lump sum to the nominee if the borrower passes away during the tenure of the plan. It also offers critical illness cover.
It also helps one provide EMIs to borrowers if they are medically incapable of working.
During the involuntary job loss, this plan can help with repayments for a limited period of time.
1. Loan amount- The loan amount is provided at a higher premium, which attracts the borrowers.
If there is a long tenure of loans, it increase costs due to higher risk and over the age of 50, insurance premiums are higher for borrowers.
Factors to be considered include determining whether the existing health or life insurance offers sufficient coverage.
Other factors include considering exclusions from policies, especially for self-employed individuals or those with pre-existing conditions. It also includes the cost of premiums and the impact on loan expenses.