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Note
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Not to be confused with a business loan
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Cover
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- Life, TPD (incl. WoP)
- According to loan duration and amount
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Purpose
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- Often required by the bank in addition to other guarantees
- Reimburses the outstanding loan amount
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Beneficiary
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Bank
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Insured
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- Principle earner
- Joint life cover for spouses / partners
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Evidence
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Depending on sum assured:
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Income
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Usually a 3-year average should be used. Be careful with trends, high deviations, and one-off payments.
- Employed:
- Earned gross income
- Regular allowances, bonuses, commissions, etc.
- Self-employed:
- Net profit before tax * share percentage
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Calculation
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No uniform calculation
Points to be considered:
- Sum and duration should match that of the loan
- Borrower should be insured
- If multiple borrowers take out policies for the same loan, over-insurance can occur if the full loan amount is insured several times over. In order to avoid this, it is recommendable to use a joint life cover or insert additional policy conditions stating that the requested loan amount should only be paid out once
- Borrower / insured should be the principle earner
- Purpose of the loan cover
- Interest rate
- Other guarantees
- Was the insurance requested by the bank / lender?
Multiples can be used as a reference, but you can be more lenient for loan cover.
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