How education loan insurance eases financial stress: The cost of international education can be a significant financial burden on both students and their parents. A lot of students take education loans to pursue higher studies at their dream university. Education loan insurance is an important financial tool that helps to tackle any kind of unforeseen circumstances during loan repayment. In this blog, we will explore how education loan insurance plays a crucial role in supporting Indian students pursuing their dreams of studying abroad.
Table of contents
What is a Loan Insurance?
Loan insurance is insurance on the entire loan amount which assists in the repayment and covers any unforeseen circumstances. For example, Ramesh took a loan of INR 10 lakh from ABC Bank. He was the sole breadwinner of his family and due to a road accident, he became permanently disabled. Now the bank will initiate the loan recovery process which can put the family of Ramesh under a huge financial crunch. In this case, the loan insurance will come into action and the remaining amount of the loan will be paid by the insurance company.
- We can say that loan insurance is quite similar to life insurance as it helps your family in the event of an accident or death.
- The loan insurance is not mandatory but it should be taken and the bank will insist on you for the same.
- If you have availed a loan insurance over your education loan the insurance premium amount might be deducted directly at the time of loan disbursement.
While taking an education loan it is very important to analyse your credit history and credit score. Check this blog on Understanding Credit Score and Its Impact on Education Loan Refinancing
How Education Loan Insurance Eases Financial Stress?
Education loan insurance, also known as education loan protection insurance or education loan repayment insurance, is designed to safeguard the financial interests of both students and their parents as well as the bank. The bank will insist you take education loan insurance as it will protect the risk of your account becoming NPA in case of any unfortunate events. Let’s understand how loan insurance helps you to avoid financial risk for you and your family.
Loan Repayment in Case of an Unfortunate Event
Education loan insurance covers the outstanding loan amount in the event of the student’s unfortunate demise. This means that the burden of repaying the loan does not fall on the family, providing them with financial security during a difficult time. The insurance company will pay the remaining amount of the loan directly to the bank after passing the claim.
Coverage for Disabilities
In cases where the student becomes permanently disabled and is unable to earn money and repay the loan, education loan insurance helps to cover the outstanding balance. In this situation, the borrower and the family both will be free from any financial stress in tough times. However, it shall be noted that the bank and the insurance company will carry out a detailed enquiry of the entire event before passing the claim. The students are suggested to avail the facility with utmost good faith principle of insurance and no hidden things should be there.
Education loan refinancing is a preferred by lot of students in a rising interest rate environment. Check this blog on Demystifying Education Loan Refinancing for Indian Students
Encourages Education
There is often confusion among the students about getting a job after finishing the course in a foreign university and this makes them worried about repaying the loan if taken. Education loan insurance encourages students to pursue higher education by providing a safety net for unforeseen circumstances. This support motivates students to explore their full potential without financial concerns holding them back.
How to Choose the Right Education Loan Insurance?
When you apply for an education loan in a bank a lot of formalities and paperwork need to be done. During this period the bank may offer you and insist on taking a loan insurance for your benefit. This also reduces the risk of account turning NPA (Non-Performing Asset) for the bank. However, if you want to choose the best-suited education loan insurance plan then you must consider the following factors:
- Always check that the loan insurance covers all causes of death and not only specific conditions like accidents.
- Both temporary and permanent disabilities are covered by the loan.
- Try to find an education loan insurance which covers a higher amount.
- Check insurance plans with low premiums and high coverage.
- It’s better to pay the premium amount at once and not opt for monthly premium payments.
- Check the terms and conditions of the insurance company specifically in case of loan transfer. If the policy dissolves on loan transfer then either look for another insurer or take a fresh policy if you are transferring your education loan.
FAQs
Loan insurance is a type of insurance that covers the repayment of the loan in case of the death or disability of the borrower.
Though it is not mandatory to take insurance for your education loan it is a good option as it helps you in case of any unforeseen circumstances and keeps your family out of financial stress.
Contact your bank while taking insurance for your education loan. They can offer you the best policy at an affordable premium amount.
This was all about education loan insurance and how it eases financial stress for you and your family. Always check all the terms and conditions of the insurance company before taking the policy.
To know more about education loan insurance, 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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