Education loan insurance is one of the most important financial products that students should avail while studying abroad. Loan insurance is essential as in case of any unforeseen circumstances like death or permanent disability of the borrower, the family is not liable to repay the loan. The insurance company will repay the complete loan amount on behalf of the student.
A lot of students are often confused between life insurance and loan insurance life cover. Let’s discuss some of the most common FAQs on Education Loan insurance for students studying abroad.
Table of contents
- What is Education Loan Insurance?
- Is Education Loan Insurance Mandatory for Students Taking Loans to Study Abroad?
- How Does Education Loan Insurance Differ from Regular Life Insurance?
- What Events Does Education Loan Insurance Cover?
- Can Education Loan Insurance be Purchased Separately?
- How is the Premium for Education Loan insurance calculated?
- Can the Education Loan Insurance Premium be Added to the Loan Amount?
- What Happens if the Borrower Fails to Pay the Education Loan Insurance Premium?
- How Does Education Loan Insurance Benefit the Borrower’s Family in Case of Demise?
- Are There Any Waiting Periods for Specific Benefits Under Education Loan Insurance?
- Can Education Loan Insurance Cover the Borrower’s Co-applicant or Guarantor?
- How Does Education Loan Insurance Handle Loan Repayment During the Borrower’s Disability?
- Can the Borrower Choose the Insurance Provider for Education Loan Insurance?
- Is it Possible to Cancel Education Loan Insurance Once it Has Been Purchased?
What is Education Loan Insurance?
Education loan insurance is a financial safeguard that protects borrowers and their families in case of unforeseen circumstances, such as the borrower’s disability, critical illness, or sudden demise. It ensures that the loan is repaid without imposing an additional financial burden on the family.
Is Education Loan Insurance Mandatory for Students Taking Loans to Study Abroad?
While it is not mandatory, many financial institutions strongly recommend education loan insurance to mitigate risks associated with the loan. It provides a safety net for both the borrower and the lender. In case of sudden demise or permanent disability, the insurance company will pay the remaining loan amount and also provide reimbursement to the nominee if the sum assured exceeds the remaining loan amount.
Also Read: Looking for loan insurance from a public sector bank? Check all about Bank of India SUD Life New Sampoorna Loan Suraksha
How Does Education Loan Insurance Differ from Regular Life Insurance?
Education loan insurance is specific to the outstanding education loan amount and covers events directly affecting the borrower’s ability to repay. Regular life insurance, on the other hand, provides broader coverage for various life events. In life insurance, the sum assured is provided directly to the nominee in case of the demise or permanent illness of the insured.
What Events Does Education Loan Insurance Cover?
Major events under the Education loan insurance coverage are the borrower’s permanent disability, critical illness, or sudden demise during the loan tenure. In case the death has occurred due to suicide, most insurance companies provide death cover only if the suicide has been committed after 12 months from the date of purchasing the policy.
Can Education Loan Insurance be Purchased Separately?
Yes, education loan insurance can be purchased separately. However, many financial institutions bundle it with the loan package for the convenience of the borrower. In such cases, the premium amount gets deducted from the net loan amount. It is advisable to purchase the policy as suggested by the lender because it becomes easy to claim the policy.
The premium for education loan insurance is usually a percentage of the loan amount. It can vary based on factors such as the borrower’s age, health condition, loan tenure, and the type of coverage provided. Usually, the premium of loan insurance ranges between 1-3% of the total loan amount.
Yes, in most cases, the premium for education loan insurance can be added to the total loan amount. This helps in spreading the cost over the loan tenure. At the time of loan disbursement, the premium amount of the insurance policy gets deducted automatically. In case of renewal of the policy, you may have to pay separately to the insurer.
Non-payment of the education loan insurance premium may result in a lapse of coverage. It is essential to ensure timely premium payments to maintain the protection offered by the policy. It is advisable to pay the premium due for renewal of policy in advance i.e. around 20-25 days prior to the due date.
How Does Education Loan Insurance Benefit the Borrower’s Family in Case of Demise?
In the unfortunate event of the borrower’s demise or permanent disability, education loan insurance covers the net outstanding loan amount. The nominee will also get reimbursement if the sum assured exceeds the total outstanding subject to the terms and conditions of the policy.
Also Read: Check out this blog and know Why Education Loan Insurance is Essential for Students
Are There Any Waiting Periods for Specific Benefits Under Education Loan Insurance?
Waiting periods may apply for certain benefits, such as coverage for pre-existing medical conditions. Always read and understand the policy terms and conditions before purchasing the same. For certain incidents like death by suicide, there is usually a waiting period of 12 months. In case the incident occurs before 12 months, the claim will not be entertained.
Can Education Loan Insurance Cover the Borrower’s Co-applicant or Guarantor?
Generally, education loan insurance is designed to cover the borrower. However, some policies may offer additional coverage or options to include the co-applicant or guarantor. If you have taken an education loan and insurance from a public sector bank like SBI, there are chances that the policy can be claimed in case of the death or permanent disability of a co-applicant. SBI provides a loan insurance policy under the SBI Rinn Raksha Scheme.
How Does Education Loan Insurance Handle Loan Repayment During the Borrower’s Disability?
In the event of the borrower’s disability, education loan insurance will cover the outstanding loan amount or provide partial coverage, depending on the policy terms. This ensures that the loan burden is eased during the period of disability. Many insurance companies provide a complete sum assured in case of permanent disability of the borrower.
Can the Borrower Choose the Insurance Provider for Education Loan Insurance?
Some financial institutions may have tie-ups with specific insurance providers. While borrowers may have the option to choose, it’s advisable to consider the terms, coverage, and reputation of the insurance provider suggested by the lending institution. However, it is advisable to get the loan insurance from the company suggested by the lender/bank.
Is it Possible to Cancel Education Loan Insurance Once it Has Been Purchased?
Policies may have a free-look period during which the borrower can cancel the insurance and receive a refund. However, after this period, cancellation terms may vary. Read all the cancellation-related terms and conditions before purchasing the policy.
While education loan insurance is a useful financial tool, remember to consult with financial advisors and insurance professionals to get insurance coverage for your specific needs and circumstances.
To know more about education loan insurance, loan application process, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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