Personal Loan Insurance in UAE: Job Loss Insurance UAE
Personal loan insurance has been known by several names such as Payment Protection Insurance, Credit Insurance, Loan Shield Insurance, and many more. But all of these offer a similar level of coverage. In this article, we will explain what exactly personal loan insurance is all about and whether or not you should opt for the same.
Personal Loan Insurance UAE
Personal loan Insurance is the type of insurance that is basically designed to protect the policyholder’s outstanding loan in case of any unfortunate event such as sudden disability, loss of employment, etc. Moreover, the most common events covered under such type of insurance policies are often disability & death, loss of a job. Whether you need personal loan insurance because of unemployment or due to disability, it helps in protecting monthly loan repayments and safeguarding the policyholder from default.
How Does Personal loan Insurance Work?
If you currently have an outstanding loan and unfortunately you end up losing your job or meet with some other hazard then the insurance against personal loan helps you to meet your monthly debts a up to the pre-specific amount. In this manner, it prevents you from defaulting on your loan. It will pay whole or some part of monthly EMIs on your behalf usually from 12 to 24 months as these insurance policies provide short-term protection. However, it depends on the concerned insurance provider as well as the policy you opt for.
The privileges of a personal loan insurance policy can either be utilized to pay off a personal loan in UAE or any other type of finances. Policies are generally offered for people who are between 18-65 years of age and also they are working at the time of buying an insurance policy. In order to be eligible for loan protection insurance, policy buyer often has to be self-employed for a certain period of time or he/she has to be employed at least 16 hours a week on a long-term contract.
There are basically 2 different types of personal loan insurance UAE:
- Standard Insurance Policy: Some companies offer a standard policy that is offered irrespective of the age, gender, occupation & smoking habits of the policy buyer. The policy seeker can decide what amount of insurance cover he/she wants. Standard policy is easily available as the majority of the companies offer this type of policy. Please note that the maximum insurance coverage is 24 months.
- Age-Related Insurance Policy: For an age-related insurance policy, the amount is determined on the basis of age as well as coverage amount that policy seeker wants to have. And the maximum insurance coverage duration is 12 months. The insurance might be less expensive for younger policyholders because insurance companies believe younger people are likely to make fewer insurance claims in comparison to older people.
Is it Mandatory to take Personal Loan Insurance for all Borrowers?
Of course, not! This is optional insurance coverage that is provided by banks to people who offer a personal loan in UAE. There is no compulsion by the Central Bank that every borrower must buy it. Thus, it is the choice of borrowers whether or not they want to avail it.
Some Important Things to keep in Mind While opting loan Insurance
- Make sure you go through the terms and conditions carefully.
- Give proper attention to when the insurance coverage starts.
- Insurance coverage is with the insurer and not with the bank. So, do not forget to check the insurance company’s market value as well as reputation before availing it.
- Some loan protection insurance companies say that the claim can be submitted after 60 to 90 days of disability or loss of a job. It means that you would have to pay the outstanding loan for 3 months on your own before submitting an insurance claim.
What do I do if I have a Loan and I lost my Job in the UAE?
‘I have a loan and lost my job in UAE.’ This is one of the issues that a lot of people have been worried about. In case you have an outstanding debt, your bank account may get blocked. When you change your job or lose the current one, the last salary you receive will be marked as the end-of-service benefit or final payment by your employer.
The last thing you would want in such a situation is to end up with no access to money, or direct debits & standing orders getting declined or rejected, or inability to repay your loan. Talk to your lender or bank in advance to make sure they explain you the process of getting a salary Certificate and letter from your new employer so that you can prevent your accounts from getting frozen.
It is recommended that you check with your lender on their rules and policies related to the changes in your employment status in advance. This will protect you from any surprises. In fact, banks or lenders may offer you realistic solutions for reducing your financial stress.
When you end up having no monthly income, it can be accounted as the best time for making sure you plan your budget wisely. Create a spreadsheet for the expenses or install a handy money app on your mobile. This will help you in keeping an eye on your cash outflows and spending all the time.
In the hour of need, it could be tempting to borrow cash, but you could fall into more debt much faster as well as deeper in case you take on more credit while you are unemployed.
Another obvious turn to take in such cases would be a credit card. However, if you are not able pay your credit card in full every month; they can turn into a sure-shot way of getting into debt further.
A lot of people on losing their jobs turn to credit cards as their last resort. But you must remember that this will make your situation worse because credit card debts come at a very high rate of interest. Hence, it is not the best idea to add-up to your debts for keeping up with the lifestyle you used to follow while you were employed.
Check with your lender, if they offer a long-term and temporary lower monthly plan for repayment. Never ignore the fact that you may be in some kind of financial crunch and contact the concerned lender to see if they can be of any help.
You should check if your loan tenure can be modified in case you are facing difficulties in making your payment regularly. You will find that there are many banks that will help you in accommodating if you have an excellent credit history.
Job Loss Insurance UAE
Job loss coverage is not offered to the borrowers of all the types of loans. It is an involuntary loss of employment insurance, that is, you will be eligible for claiming the benefits of this loan insurance only when your loss of job is involuntary. The provider will ask you to submit the termination letter with other required documents. For avoiding any shocks, ensure that you read the fine print carefully so that you are well aware of all the other exclusions of job loss insurance UAE.
You must plan for unpredictable and unforeseen events like loss of employment from the time you opt for a credit card or personal loan. Although there is a premium amount on this type of coverage, holding an alternative option for managing your debt repayments will make a big difference if you, unfortunately, end up losing your job.
Looking for a New Job in the UAE
In case you have no idea how to make your next mortgage or rent payment, then probably you will need to find a job right away. But do not go for anything that comes to you as a quick-fix solution. If you are not very happy about the job you are opting for, make sure that you do not get into a long contract, which may be hard to get out of.
You also have the option of freelancing or temporary employment for helping you to keep afloat at the time of crisis. You also need to understand that you must not take the first job that comes your way without thinking about it. It makes no sense to leave it soon in case it doesn’t work out and land back into the scenario that you are currently in. Therefore, it is better to take some temporary job that helps you paying the bills and looking for the correct permanent job at the same time.
After you find a new job, contact the bank and update them about your employment and salary information. After you give your bank the evidence of the new employment and salary, the account could be released immediately.
It is very important to keep your bank in a loop. Remember to ask the representatives from the bank regarding the exact procedure, required documents, and point of contact for unfreezing your bank account so that you do not run around later.
The Final Verdict
Although opting for personal loan insurance is not mandatory for all people who borrow a personal loan in UAE, buying it definitely makes sense. It covers outstanding loan payments up to a certain amount if the policyholder is unable to pay due to unemployment, disability or any other unfortunate event.