Does residual debt insurance make sense for the loan?
February 11, 2020
Taking out a bank loan – depending on the amount of the loan and the term – can be associated with a certain risk for the debtor: When taking out the loan, you usually make a multi-year payment obligation to the bank – but who can guarantee today that there will still be a lot of work at home Years is safe?
In the unfortunate case that the borrower is no longer able to pay the loan installments due due to inability to work, unemployment or death during the repayment phase, the entire open debt is transferred to his closest relatives – a financial burden for many relatives, that cannot be worn.
Remaining debt insurance takes over loan repayment in case of fatal strokes
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In order to counteract possible indebtedness of their own families right from the start, many banks offer their customers so-called residual credit insurance (RKV) or residual debt insurance (RSV). Depending on the scope agreed upon, when the above-mentioned cases occur, this insurance covers the payment of the due loan installments for a certain period of time. This means that the credit insurance is fundamentally very similar to a life insurance policy, with the crucial difference that the insurance sum for RSV and RKV always corresponds to the remaining balance of the loan.
Another difference to risk life insurance is the cost of credit insurance: When the RSV is concluded, all premiums that are due by the end of the loan term are added up, added to the actual net loan amount and bear interest. As a result, the loan amount and thus the total loan costs due to the residual credit insurance increase significantly.
The sensibility of the RSV must be decided individually
Each and every borrower has to decide for himself whether and to what extent residual credit insurance is really necessary when taking out a loan. As a basic guideline, however, it can basically be stated that residual debt insurance is only really worthwhile with relatively large amounts of credit: The damage caused by a possible default on smaller amounts of credit is not related to the additional costs incurred by the insurance.