What’s Covered and What’s Not in Education Loan Insurance: Education loan insurance, also known as an education loan protection plan, is a type of insurance policy designed to provide financial protection to students and their families in the event of unexpected incidents that might hinder their ability to repay the education loan. While taking the policy a lot of students do not properly check what is included in the claim and here they make mistakes. In this blog, we will discuss in detail what categories are covered in the loan insurance and what are excluded.
What’s Covered in Education Loan Insurance?
Every insurance company has their own policies on insurance claims. Here we have listed some of the common categories which all the insurance companies cover. Check the details below:
1. Loan Repayment in Case of Death
In the unfortunate event of your death, the insurance will cover the entire outstanding loan amount. This ensures that the financial burden does not pass on to the student’s family. Your family or the co-applicant won’t be liable to pay any kind of outstanding when the insurance policy is covering the death.
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2. Loan Repayment on Disability or Critical Illness
Laxman was a student at the University of British Columbia and he had taken a loan of INR 10 lakhs. He suffered an accident and the doctors declared him permanently disabled. He couldn’t continue his education and came back to his home. Now he filed a claim with the loan insurance company and explained the reason for discontinuation of the course. The insurance company agreed to pay the outstanding loan amount resulting in the closure of the loan. Even if Laxman had been declared temporarily disabled then the insurance company would have passed the claim. Hence, we can understand that education loan insurance covers loan repayment in cases where the borrower becomes temporarily or permanently disabled due to accidents.
3. Loan Repayment on Death of Either of the Applicant
Some insurance policies cover the death of both the applicant and the co-applicant. For example, if you have taken an education loan and unfortunately the co-applicant died due to genuine cause. In this case, you can make the claim and close your loan with the sum assured or the claim amount. This will be applicable if you have taken a joint cover policy.
4. Coverage for Co-borrower
If a family member or guardian is a co-applicant in the education loan, the insurance can provide coverage for them as well in case of the student’s demise or disability. For example, if the total loan amount is 10 lakh and you have already paid 5 lakhs. But originally the sum assured was INR 10 lakhs. In this case, the insurance company will provide the total sum assured i.e. INR 10 lakhs irrespective of the net due in the loan amount. However, this may vary from company to company as all the insurance companies don’t have the same coverage. Check with your insurer whether they are providing this category of coverage with the policy.
What’s Not Covered in Education Loan Insurance?
While taking an insurance policy for your education loan check properly the list of exclusions. The insurance companies do not cover some categories like any pre-existing illness/diseases, suicide etc. Also, if you knowingly default on your loan the insurer will not be liable to pay any amount. Check the detailed list of exclusions of education loan insurance:
1. Death by Suicide
A lot of insurance policies have a suicide clause, which means that if the student commits suicide within a specified period after taking the policy (usually one year), the insurance may not cover it. However, this also requires it to be proven in a court of law or to be certified by a doctor that the cause of death is suicide only and nothing else.
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2. Pre-Existing Disease
Education loan insurance may not cover pre-existing health conditions or diseases. This means that if the student has a medical condition at the time of taking the loan, related expenses may not be covered. If anything happens to the borrower due to pre-existing diseases then the insurance company will not pay anything towards the loan.
3. Failure to Meet Academic Requirements
Failing to meet academic requirements or dropping out of the course voluntarily may not be considered valid reasons for a claim. If you are not performing well in your academics and leaving the college before the specified period then the insurance company will not be responsible and no amount will be paid towards the loan.
4. Delayed or Missed Premium Payments
If the policyholder fails to pay the premium on time, the insurance coverage may lapse, and no benefits will be provided. Always make all the EMI payments on time without any delay. Late payments will attract additional interest and penalties which will make the entire loan more costly.
FAQs
Most of the insurance policies have a suicide clause. If a borrower committed suicide then the insurance company is not liable to pay any amount.
No. If the student deliberately leaves the course before completion then no claim can be made against the loan insurance.
Loan insurance mostly comes along with a loan and is arranged by your bank/lender. If you have taken an education loan from SBI then you can take the SBI RiNn Raksha policy for education loan insurance.
Education loan insurance can be a valuable safety net for Indian students studying abroad, offering financial protection in challenging times. However, students and their families must understand the fine print of the policy to know what is covered and what is not.
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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