Plans to take out a home loan? Then you may have already come into contact with a lot of insurance jargon, the definition of which is not always clear. Here we take a closer look at the terms debt balance insurance and life insurance. What exactly is the difference? And is there a difference at all?
Every debt balance insurance is a life insurance policy
A debt balance insurance is a form of life insurance that covers the insured person in the event of death . The capital is thereby linked to a balance to be repaid (for example, a mortgage loan). To be able to speak of a debt balance insurance, the life insurance must furthermore meet the following characteristics:
- A credit balance insurance is temporary because the term always corresponds to the term of the credit to which the credit balance insurance is linked.
- Decreasing capital is insured.
- A debt balance is a pure death insurance policy : only if the insured person dies during the term of the policy, the capital owed is settled by the debt balance insurer . If the term of the credit expires and the insured is still alive at that time, no capital will be paid.
- The insurance is linked to a loan whose capital is repaid step by step during the term. It insures at any time during the credit term , the capital that the insured owes.
Not every life insurance policy is a debt balance insurance
Life insurance policies that insure a fixed capital against the death of the insured person do not therefore fall under the category of balance insurance, which only covers a decreasing capital. Insurances that insure a (fixed) capital both during the life and death of the insured do not meet the characteristics of a balance insurance policy. With a (mixed) life insurance policy you can, for example, build up a supplementary pension and guarantee a death capital to your family if you die before the end of the contract.
Tip: in most cases there is the possibility to link an additional guarantee to your debt balance insurance, which, for example, pays out an additional capital in the event of death due to an accident or provides financial compensation in the event of work disability due to illness or accident. Ask your debt balance insurer about it!
Debt balance insurance: not exclusively for mortgage loans
Please note: a balance insurance policy is not limited to mortgage loans. You can take out a credit balance insurance for each loan taken out , as long as there is a minimum amount to be insured . For example, a credit balance insurance is an option when purchasing a car, and even for personal loans you can also take out a credit balance insurance.