Every time you apply for a loan or credit from a bank—especially long-term ones, such as a mortgage or business capital loan—the term “credit life insurance” may already sound familiar.
Credit life insurance is specifically designed for those who have loan installments. It serves as a safeguard so that debt does not become a burden passed on to heirs if the borrower passes away.
But what exactly is credit life insurance? To understand it better, this article will explain its definition, how it works, and the benefits it offers. Let’s explore the details below!
What Is Credit Life Insurance?
Credit life insurance is a form of protection intended to guarantee the repayment of any remaining debt if the borrower passes away or suffers total permanent disability before the loan term ends.
This product is generally offered by banks or financing institutions when borrowers apply for large loans, such as mortgages, car loans, or business financing.
With this insurance, the insurance company will take over the repayment to the lender, ensuring the family is not burdened with the obligation. That’s why credit life insurance is important, especially for those who are the primary breadwinners in the family.
This insurance not only provides peace of mind for the borrower’s family but also benefits the lender by ensuring loan repayment continues smoothly despite future risks. In short, credit life insurance offers dual protection—both for the borrower and for their family as well as the lender.
Benefits of Credit Life Insurance
Beyond providing peace of mind, credit life insurance offers various advantages for borrowers and their families. Here are some of its main benefits:
1. Guaranteed Loan Repayment
Credit life insurance provides financial protection by ensuring debt repayment if the borrower passes away. This way, the family is free from the burden of outstanding debt, while the bank or financing institution still receives full repayment of the loan. This creates a sense of security for both parties.
2. Additional Benefits for Heirs
In addition to repaying the remaining loan, some insurers also provide an insurance payout to the heirs—such as the borrower’s spouse, children, or parents—upon the borrower’s death.
This payout can serve as financial support for the family left behind, helping them stay afloat economically after losing their main source of income.
3. Easy Application Process
Unlike regular life insurance, which usually requires a health check, credit life insurance can often be obtained without complicated procedures. You simply register and immediately enjoy its protection benefits.
4. Maintained Credit Score
This insurance helps maintain a good credit score because debts will still be repaid even in the event of unforeseen circumstances, such as death. This ensures your credit reputation remains intact.
How Credit Life Insurance Works
Credit life insurance generally applies to loans with large amounts, such as mortgages, car installments, or business capital loans. While optional, it is highly recommended for large-scale loans.
The bank or financing institution will also assess the assets you own before determining the loan amount. Meanwhile, the premium is calculated based on the loan amount, age, and health condition of the borrower and can be paid in full upfront or in installments along with loan payments.
If a risk occurs—such as death or total permanent disability—the family or borrower can file a claim with the insurance company. Once approved, the remaining debt will be settled according to the terms of the policy.
Things to Consider Before Applying for Credit Life Insurance
Before deciding to take credit life insurance, there are several important points to consider to ensure the benefits truly meet your needs:
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Coverage limits: Clearly understand the scope of the policy, including the types of loans covered, the duration of coverage, and exclusions, such as death caused by criminal acts.
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Additional premiums: While this insurance is beneficial, it still adds to your loan cost. Make sure the premium is reasonable and aligns with your financial capacity.
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Choose a credible insurer: Select an insurance provider with a trustworthy reputation and proven track record in handling claims.
How to Claim Credit Life Insurance
If a risk such as death or total permanent disability occurs, credit life insurance can be used immediately. To ensure a smooth claims process, follow these steps:
1. Report to the Insurance Company
The first step is to contact the insurance provider to report that the borrower has passed away or suffered total permanent disability.
Include supporting documents such as a death certificate or medical report, the insurance policy, loan documents, and identification for both the borrower and heirs. While initial notification can be made by phone, claims usually require in-person submission for document verification.
2. Fill Out the Claim Form
Once documents are prepared, complete the claim form provided by the insurance company. Submit the completed form along with the supporting documents to the bank or insurer. The company will then verify the claim within several business days.
3. Claim Payment
If the claim is approved, the insurance company will pay the funds directly to the bank or financing institution to settle the remaining loan. You will be notified once repayment is completed. If the policy includes additional benefits, the payout for heirs will be transferred to the account registered at the start of the policy.
That’s a complete explanation of credit life insurance—from its definition and benefits to the claim process. This protection is crucial for anyone with loan installments, ensuring that the family is not financially burdened in the event of unexpected circumstances.
Aside from having life protection, it’s also important to plan your finances wisely—especially if you need additional funds for personal, business, or family needs.
In this case, you can take advantage of financing support from BFI Finance. Through multipurpose financing, your plans can be realized more easily—from personal needs and business ventures to ensuring your family’s financial protection.
You can choose collateral that fits your condition, such as a motorcycle registration (BPKB Motor), car registration (BPKB Mobil), or property certificate (house, shop, or business space). BFI Finance is licensed and supervised by the Financial Services Authority (OJK), ensuring your security.
So, plan your protection and financing now—because #SelaluAdaJalan with BFI Finance.
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