What is loan insurance and why do I need it?

Learn the difference between the three types of loan insurance (or “creditor insurance”), and why you should consider it.

𝘜𝘯𝘦𝘹𝘱𝘦𝘤𝘵𝘦𝘥 𝘦𝘷𝘦𝘯𝘵𝘴, 𝘫𝘰𝘣 𝘭𝘰𝘴𝘴, 𝘪𝘭𝘭𝘯𝘦𝘴𝘴𝘦𝘴 𝘢𝘯𝘥 𝘪𝘯𝘫𝘶𝘳𝘪𝘦𝘴 𝘢𝘳𝘦 𝘢𝘮𝘰𝘯𝘨 𝘵𝘩𝘦 𝘵𝘰𝘱 𝘳𝘦𝘢𝘴𝘰𝘯𝘴 𝘊𝘢𝘯𝘢𝘥𝘪𝘢𝘯𝘴 𝘤𝘭𝘢𝘪𝘮 𝘣𝘢𝘯𝘬𝘳𝘶𝘱𝘵𝘤𝘺.

Loan insurance (or creditor insurance) offers security for you and your family should you experience an unexpected event like an injury or job loss. Fairstone offers three types of loan insurance: disability insurance, job loss insurance and life insurance.

Let’s take a look at what loan insurance is, and why you should consider it.

𝗪𝗵𝗮𝘁 𝗶𝘀 𝗹𝗼𝗮𝗻 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲?

Loan insurance can cover some or all of your loan payments in the event of a covered illness or injury that prevents you from working, involuntary job loss or death. The loan insurance premium is added to your loan amount – a portion of each loan payment pays down your premium bit by bit, making it an affordable way to protect yourself against the unexpected.

𝗪𝗵𝗮𝘁’𝘀 𝘁𝗵𝗲 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗯𝗲𝘁𝘄𝗲𝗲𝗻 𝘁𝗵𝗲 𝘁𝘆𝗽𝗲𝘀 𝗼𝗳 𝗹𝗼𝗮𝗻 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 (𝗱𝗶𝘀𝗮𝗯𝗶𝗹𝗶𝘁𝘆, 𝗷𝗼𝗯 𝗹𝗼𝘀𝘀 𝗮𝗻𝗱 𝗹𝗶𝗳𝗲)?

  • 𝗗𝗶𝘀𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲

Disability insurance can help cover your loan payments if you have an illness or injury that prevents you from working (as long as the disability is covered by the plan). With Fairstone, no medical exam or questionnaire is required to add disability insurance to your loan, so past medical history won’t be taken into consideration (note: mortgage loans require a short medical questionnaire, but no medical exam is required).

  • 𝗝𝗼𝗯 𝗹𝗼𝘀𝘀 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲

Losing a job is stressful. Luckily, job loss insurance can help cover your loan payments if you are involuntary unemployed.

  • 𝗟𝗶𝗳𝗲 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲

If you die before paying off your loan, life insurance will pay the outstanding balance of your loan, lessening the burden on your family and protecting their financial wellbeing during this stressful time.*

𝗪𝗵𝘆 𝗱𝗼 𝗜 𝗻𝗲𝗲𝗱 𝗹𝗼𝗮𝗻 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲?

Unexpected events happen to all of us. If you need a loan, you’re likely already facing one. Loan insurance is the best way to protect you and your family from financial difficulties that may arise if you unexpectedly stop earning an income.

Here are some typical situations when people might not think they could benefit from loan insurance, but they can:

𝗜𝗳: 𝘆𝗼𝘂 𝗮𝗹𝗿𝗲𝗮𝗱𝘆 𝗵𝗮𝘃𝗲 𝗱𝗶𝘀𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝘁𝗵𝗿𝗼𝘂𝗴𝗵 𝘄𝗼𝗿𝗸

Most workplace policies only pay out a percentage of your wages. It’s likely that you won’t be able to afford all your expenses (including loan payments) if you experience a reduction in your income. By choosing loan insurance, the disability payout you receive from work can go towards expenses other than your loan, like your rent or mortgage, utility bills, grocery bills, etc.

Plus, if you’re sick or injured you’ll likely face additional medical expenses like medication, medical devices or home care costs. Loan insurance can help lessen this burden since you may not have to worry about loan payments for the duration of your disability.

𝗜𝗳: 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲 𝗮 𝘀𝘁𝗮𝗯𝗹𝗲 𝗷𝗼𝗯

Unemployment can happen to anyone (even those with a stable job). Your income is your greatest asset, and a reduction in it causes hardship. So, it’s not surprising job loss is one of the leading causes of bankruptcy. Protect your financial future by choosing job loss insurance – if you’re involuntarily unemployed, you could have your loan payments covered.

𝗜𝗳: 𝘆𝗼𝘂’𝗿𝗲 𝗵𝗲𝗮𝗹𝘁𝗵𝘆

We all take our health for granted, and forget how quickly an injury or illness can wreak havoc on our lives. On average, one in three people will be disabled for at least 90 days before age 65. A disability can last for months or even years, and could affect your ability to work. By choosing disability insurance, you’re protecting yourself from having to worry about making regular loan payments during an unexpected injury or illness.

𝗥𝗲𝗺𝗲𝗺𝗯𝗲𝗿: You can cancel your loan insurance at any time during the life of your loan, but you cannot add insurance to your loan after you receive the funds. If you think you might benefit, we recommend adding loan insurance at the beginning, and cancelling a later time when you feel secure enough to do so.

𝗪𝗵𝗮𝘁 𝗵𝗮𝗽𝗽𝗲𝗻𝘀 𝘁𝗼 𝗺𝘆 𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝗽𝗿𝗲𝗺𝗶𝘂𝗺𝘀 𝗶𝗳 𝗜 𝗽𝗮𝘆 𝗼𝗳𝗳 𝗺𝘆 𝗹𝗼𝗮𝗻 𝗲𝗮𝗿𝗹𝘆?

If you think you’ll pay off your loan early, there’s no risk of losing money on your insurance premium. Your insurance premium at the time of loan closing applies only if your loan goes the full term. If you decide to pay off your loan early, the unearned portion of the premium will be credited back to your account.

If you’re considering a Fairstone loan, we highly recommend that you choose loan insurance to protect you and your family. If you’re already a Fairstone customer and didn’t choose loan insurance, you may be able to add loan insurance by renewing your loan. Contact your local branch to find out if you’re eligible for a renewal.

Looking for more? Visit our loan insurance webpage for more information and for answers to frequently asked questions.

𝘐𝘯𝘴𝘶𝘳𝘢𝘯𝘤𝘦 𝘴𝘰𝘭𝘶𝘵𝘪𝘰𝘯𝘴 𝘱𝘳𝘰𝘷𝘪𝘥𝘦𝘥 𝘣𝘺 𝘈𝘮𝘦𝘳𝘪𝘤𝘢𝘯 𝘏𝘦𝘢𝘭𝘵𝘩 𝘢𝘯𝘥 𝘓𝘪𝘧𝘦 𝘐𝘯𝘴𝘶𝘳𝘢𝘯𝘤𝘦 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘰𝘳 𝘛𝘳𝘪𝘵𝘰𝘯 𝘐𝘯𝘴𝘶𝘳𝘢𝘯𝘤𝘦 𝘊𝘰𝘮𝘱𝘢𝘯𝘺. 𝘏𝘰𝘮𝘦 & 𝘈𝘶𝘵𝘰 𝘚𝘦𝘤𝘶𝘳𝘪𝘵𝘺 𝘱𝘭𝘢𝘯𝘴 𝘢𝘳𝘦 𝘢𝘥𝘮𝘪𝘯𝘪𝘴𝘵𝘦𝘳𝘦𝘥 𝘣𝘺 𝘏𝘰𝘮𝘦 𝘢𝘯𝘥 𝘈𝘶𝘵𝘰 𝘚𝘦𝘤𝘶𝘳𝘪𝘵𝘺 𝘗𝘭𝘢𝘯, 𝘐𝘯𝘤.

 

*Coverage varies and is subject to the terms and conditions of the insurance policy and applicable law.