What is Income or Loan Protection Insurance?When buying a car it’s not always possible to pay for a vehicle in full, which is why many people opt to spread the cost through financing or loans.But what happens if you are unable to pay your loan amounts back? Life has a habit of getting in the way sometimes – and if the worst happens, you may find that you are unable to pay your monthly car loan repayments.
Loan Protection (also known as ‘Income Protectection’) insurance can protect you against potential inability to pay for your car insurance and car loan.
Why is Gap Insurance a Good Idea?
Loan protection insurance isn’t something you have to take out as standard. However, when you first buy a vehicle, you may wish to add on this extra safety net should you be worried about being unable to make your car loan payments in the long run, potentially adversely affecting your credit file.
This insurance will cover you if you find that you are unable to work due to particular circumstances. For example, if you are injured, permanently disabled, or take ill to the point where you can no longer hold down full-time employment, you may not be able to pay for your car loan.
That is where Loan Protection insurance comes in. When you are unable to pay for your car loan, your insurance carrier will be in a position to clear car loan payments for you. It is an excellent way to achieve peace of mind should you ever find yourself unable to pay certain debts.
Things to Consider
However, as always, there are a few points to bear in mind when it comes to taking out insurance. You will, of course, be subject to specific fees and checks before you take out a policy. There is also the matter of whether or not payment protection will actually come in handy for you. All insurance is there to protect you just in case – however, payment protection is a relatively unique form of a safety net.
As most car loan providers will need to be confident that you can pay back a loan, you may already have savings put aside in case you are unable to fund such costs. If you already have a generous amount of savings, there may not be much need for income protection insurance. Before taking out Loan Protection insurance you should also check your loans aren’t already covered by your Life Insurance policy, if you have one.
Other factors which could affect your decision may include the type of car you drive, and how often you drive it. If your premiums for car financing are already low, there may not be much point seeking out extra protection.
To Protect or Not?
Ultimately, loan protection insurance is a choice. It is an extra cost which could provide you with a worthwhile safety net. But is it worth it, given your specific circumstances?
For more information on car loans, loan protection insurance and more, call our experts at Auto Car Loans today on 1300 301 051.
DISCLAIMER : The thoughts and opinions conveyed on this website are those of the authors only and are of a general nature. This does not constitute financial or general advice to you from Auto Loans Group. You should seek your own independent advice from a professional which is specific to your circumstances before considering any of the items referred to in this article, including finance, insurance, and car buying.