When a person has taken out consumer credit, that person undertakes to repay debts. Consumer credit can be very useful for financing different projects. However, certain unforeseen events in life could disrupt the progress of a good project. Death is an unfortunate event that is unpredictable. Many people have to wonder about the future of the repayment of a loan in the event of the borrower’s death.
If the borrower has taken out insurance
In the event that the deceased has outstanding balance insurance, reimbursement, depending on the functionality of the insurance contract, is the responsibility of the insurer. Some lenders and other creditors may require death insurance when applying for consumer credit. However, the cost of insurance is not necessarily included in the overall effective rate of a consumer credit.
When the deceased has chosen to attach insurance to one or all of the loans he has taken out, his debts will be covered until the end of his terms. In addition to a guarantee for the lender, death insurance also allows a borrower to protect his family, especially the spouse and children, from any financial worries that may arise after his death. The insurer is a separate property from the creditor. This means that the borrower should smile for death insurance from another company specializing in insurance.
As with credit offers, many insurers offer different rates and conditions on the internet. It is advisable to seek the advice of a financial expert or to seek the help of a broker to ensure that you have signed with the right insurer.
If the borrower is uninsured
Without having purchased insurance, a borrower puts his family at risk. Why ? Because his loved ones will inherit his debts. Real estate, savings accounts, investments and loans are part of this heritage. It is only after the payment of outstanding debts, various invoices (electricity, gas, heating, water …) and taxes that the heirs can share the profits … if there are any!
It happens, and it is not uncommon, to find that the amount of credits contracted and remaining due to the deceased is much higher than the value of the inheritance that he left. In this case, the heir has three options:
- Either, the heir accepts the inheritance purely and simply: this means that he will obtain all the goods while assuming the reimbursement of all the debts of the deceased.
- The heir chooses the acceptance of the succession under inventory benefit or up to net assets: in this case, the capital of the heirs and the patrimony of the deceased will be separate things. This option is often necessary in case of doubt about the sum of debts compared to the value of inherited property.
- The renunciation of the succession means that none of the heirs will have the share of the inheritance that he should have inherited. In other words, the heir loses his quality of heir and will not be held responsible for the reimbursement of debts and credits left suspended by the deceased. This renunciation is irreversible even if the heir discovers much later that the deceased still had other locations…
In summary, there is no advantage in not taking out death insurance to protect loved ones. You just need to be well informed and choose the best consumer credit rate on the market!