Do MFI Borrowers Need Insurance?

It is not necessary to have a law degree to resolve disputes with an MFI. In many cases, problems can be avoided in advance – if you know the specifics of the services that such organizations provide. One of the most comfortable services in microcredit is loan insurance. This condition for receiving money is not obligatory – it is exclusively voluntary, but it covers debt payments on certain covered loans if the insured loses their ability to pay due to a covered event.

Why you need insurance

The advantages of loan insurance are as follows:

• When an insured event occurs, the lender receives all the money owed from the insurance company – the amount borrowed + interest;
• You do not bear financial obligations (you receives compensation from the insurance company) and do not collect the necessary documents: everything happens without your participation.

Insured events can occur in case of loss of ability to work (injury, disability) or work, during hospitalization and deterioration of the financial situation – all options are provided for in the insurance contract.

IMPORTANT! The service is voluntary. If you are planning to sign such an agreement, carefully study the document or ask a lawyer to do this.

Insurance process

If force majeure occurs before the end of the loan agreement, the procedure for obtaining insurance is carried out according to the scheme:

• You or your representative (relative, friend) collect documents that confirm the existence of an insured event. The documents must be certified by the appropriate person (in case of illness – by a medical institution, in case of job loss – by the personnel department, etc.) and transferred to the MFI;
• The lender notifies the insurance company;
• The insurance company sends inquiries to the relevant organization (police, hospital, workplace) to confirm the relevance of the insured event;
• After confirming the information, all risks (the original debt + interest) are paid by the insurer company.

An insured event can occur when you are not in your state or country: you just need to provide the creditor with the relevant documents and a claim for debt recalculation. Next is the procedure described above. In this way, you exercise your right to receive reimbursement, but only on the condition that the loan has been insured.

IMPORTANT! The documents must describe in detail the causes and consequences of the insured event; have signatures of responsible persons and seals. This will speed up the procedure for paying off debts and canceling the debt.

When insurance is not valid

Each company has its own insurance conditions. But all ICs stipulate events that will not be recognized as insured events:

• Loss of job: when you quit on your own or when you are fired due to violation of official duties (instructions);
• Incapacitation: when the injury is received by knowingly or deliberately violating safety rules;
• Suicide;
• Deterioration of the financial condition: the damage (destruction) of the property was carried out by the borrower deliberately.

IMPORTANT! If the borrower provided incorrect information during the execution of the loan agreement, he or she will not receive a refund.

Which MFIs offer insurance services

You can get accepted for online payday loans Texas even if you have refused to buy loan insurance: this is your right, not an obligation. But the conclusion of such an agreement can give several advantages – the lender will be more loyal to your application, offer a lower interest rate or an increased loan size. In any case, payday loans can be used for whatever purposes and the application is very simple. You can apply for it anytime and pick a repayment term that suits your needs.

Most MFIs enter into contracts with the same insurance company. The reason is that long-term cooperation with the same partners eliminates delays and misunderstandings. It is beneficial for all parties: the borrower, the insurance company and the lender.

Loan insurance: yes or no?

MFIs are interested in loan insurance: no one wants to lose money and engage in litigation for their return. Therefore, if you refuse to insure a loan and at the same time do not have confirmation of your financial solvency (having a job, steady income, having a real estate or other property) you will likely get rejected or be accepted for a smaller loan amount.

There is a benefit for the borrower. If an insured event occurs, you will not have to pay interest, fines or even the original loan. If nothing happened, the cost of the service is insignificant in comparison with the penalties that may be imposed on you.

The choice is yours. The main thing is to carefully read the proposed terms and conditions.

Category: General

Tags: finance, insurance, money