Loan Protection Insurance

Loan protection insurance

Loan protection insurance is designed to assist you in meeting your finance contract repayments in the event of specific changes to your personal circumstances. The following video provides a comprehensive overview of loan protection insurance:

Loan protection insurance benefits

Loan protection insurance can assist you in meeting your repayments in the event of changes to your:

  • Health;
  • Employment status; or
  • As a result of your death.

The loan protection insurance provided under the Product Disclosure Statement (PDS) is to assist with your vehicle loan repayments in the event of any of the following circumstances occurring:

  • In the event of your death;
  • If you suffer a ‘traumatic event’ and satisfy the definition of the same as contained in the PDS;
  • If you become involuntarily unemployed; or
  • If you are unable to work due to accident or sickness.

Loan protection insurance typically covers you in four categories

Disablement insurance

Doug is employed as a full-time administration officer. He has a regular monthly loan repayment of $300. He suffers an injury on the 12th March and is unable to work from 13th March to 27th June inclusive. He has a medical certificate from his doctor for this period. Doug submits a disablement claim and the claim is accepted. In this example under the disability benefit there is no benefit payable for the first 14 days. So Doug would be paid a disablement benefit from 27th March to 27th June. For each day of disablement (excluding the first 14 days), Doug will be paid 1/30th of the monthly benefit. As Doug was disabled for 92 days, the amount paid under the policy would be 92/30ths of $300, which equals $920. This is paid directly to Doug’s finance company.

Involuntary unemployment insurance

Julie is made redundant from her job on 16th September. She is involuntarily unemployed from 17th September to 12th December inclusive. She has a regular monthly loan repayment of $600 and has involuntary unemployment insurance. She submits an involuntary unemployment claim and it is accepted. In this example again, there is no benefit payable for the first 14 days of involuntary unemployment. So Julie is eligible for benefit payments from 1st October to 12th December inclusive. This is a total of 73 days, comprising 31 days in October, 30 days in November and 12 days in December. The total benefit payable is therefore worked out as 73/30ths of $600 which is $1,460. This is paid directly to Julie’s finance company.

Death benefit insurance

Jack chose to purchase death cover under his loan protection insurance policy when he arranged his $29,000 loan in March. On 5th of August, John suffered a fatal stroke. As at the date of Jack’s death, the amount outstanding on his loan was $26,000. In this example the total cover is $75,000. Therefore, a lump sum benefit of $26,000 will be paid to John’s finance company to finalise the loan.

Trauma benefit insurance

Lyn took out death and trauma cover under her loan protection insurance policy when she arranged her $25,000 loan in August. On 15th May, Lyn has a heart attack and is admitted to hospital. On this date, the amount outstanding on Lyn’s loan is $21,000. Lyn submits a claim for a trauma benefit for assessment. After reviewing the necessary evidence, her claim is accepted by her insurer. In this example, the maximum benefit payable is $40,000. So a lump sum of $21,000 is paid to Lyn’s finance company to finalise her loan.

Look at loan protection insurance

As you can clearly see there is a huge benefit in obtaining loan protection insurance when you are financing your next car purchase. In this way, you will receive the benefit over the full term of the contract for price of the the once-only premium. Depending on the cover selected, this could cost you as little as $5 a week*. But if something unforeseen happened to you, such cover could save you thousands.

Remember though, all insurance policies have exclusions and all companies have different levels of cover. So we recommend that you read the Product Disclosure Statement to select the best policy to suit your needs. If you have any questions, please directly speak to the advisor arranging your loan protection.

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