Monthly instalments can be protected with insurance. In clearly defined cases, the borrower's instalments are taken over by the insurance company. You can find the most important information about a payment protection insurance here.
There are four key events for which loan insurance is taken out:
For accident, illness, and involuntary unemployment, the insurance is optional and requires an additional premium on top of the monthly instalment.
Before taking out any insurance, you should carefully review the offer. Here are some key points:
Loan insurance does not apply in every case from the first day of the loan payment (called «Karenzfrist»). If the borrower changes jobs, this type of waiting period applies during which there is no insurance coverage. The second type of waiting period refers to a delay after the occurrence of an insured event before the insurance covers it.
If the deadlines defined in the General Terms and Conditions (GTC) have expired, the assumption of costs is regulated in detail and determines the coverage or reasons for exclusion of insurance benefits.
Basically, the coverage is defined for each type of event:
As with any insurance, there are cases where no benefits are provided. Check these in the General Terms and Conditions of the provider.
As with any insurance, there are also exclusions for loan insurance where no service is provided. Check these in the general terms and conditions of the respective provider.
Waiting periods for insurances – what’s the difference?
In Switzerland, insurance involves two types of waiting periods. The "Karenzfrist" is the initial period before coverage begins. If an event occurs, a "Wartefrist" also applies, meaning the coverage doesn’t start immediately with the claim.
An examination does not necessarily take place before a loan insurance policy is taken out.
In summary: no separate health check is conducted. An application may be rejected if a review occurs before the insurance period. If a known health issue leads to a claim, the insurer won’t pay.
Once the loan is fully repaid, the insurance ends, whether per the regular schedule or through early repayments, which are allowed anytime in Switzerland. Even if issues arise leading to early termination by the lender, the insurance ends with the loan agreement. This may occur in cases of gross default, where the lender terminates the contract and demands the full amount, or, for example, in personal bankruptcy.
Since there is no obligation to take out loan insurance, it can also be terminated during the term of the loan.
The termination conditions – i.e. the time at which the insurance can be terminated in each case – as well as requirements for the form (written form) are regulated in the General Insurance Conditions. As a borrower, you take out the insurance via bank, which means that the termination of the insurance must also be sent to the lender for the insurer's attention.
There are other reasons why loan insurance ends – for example, if a job is started abroad or maximum defined insurance benefits have been provided according to the contract.
If there are no grounds for exclusion (in particular unemployment or illness), it is generally possible to take out loan insurance at a later date. However, the handling differs depending on the provider. We will be happy to advise you if you have any questions about a current or future loan agreement on the subject of insurance.
TInsurance offers vary by lender. In the past, some lenders didn’t provide insurance or covered only certain types of claims.<br>In partnership with AXA Insurance, we offer our customers a solution not directly linked to the loan agreement.
Loan insurance, like all insurance products, is fairly complex and tightly regulated. As the key question when applying for a loan is whether you’ll get one, and only then which lender you’ll use, you don’t get to choose the insurer.
Deciding for or against loan insurance is highly personal and depends, among other things, on your risk tolerance. In cases of illness, accident, or unexpected unemployment, depending on your financial situation and fixed costs, a loss of income may make paying instalments difficult or impossible, forcing you to cut back elsewhere.
We’d be happy to advise you on loan insurance after your non-binding loan enquiry if you have further questions.
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