Loan Insurance

An insurance policy that covers the repayment of a loan in the event of the borrower's inability to make the repayments either through an accident, sickness or unemployment. Loan insurance may add a substantial amount to the cost of the loan. It is easily possible that an otherwise attractive interest rate deal may actually cost more on a monthly basis than a loan charging a higher rate because of the insurance charges. Some lenders insist on loan insurance, whereas others are prepared to be flexible.