Insurance

Credit Life Insurance

Credit life insurance protects borrowers against unexpected events such as death or disability and provides reliable coverage for these risks under loan agreements offered to individuals. Through this insurance, the outstanding loan balance is paid by the insurance company, ensuring that family members and close relatives bear no financial responsibility for the remaining debt.
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Terms

Insured Person – An individual borrower whose life is insured under the policy against death and loss of working ability within the scope of the loan agreement

Beneficiary – The party entitled to receive the insurance payout in accordance with the insurance contract (the bank or credit institution).

Insurance Payout Amount – In the event of the insured person’s death from any cause, the payout equals 100% of the insured amount.

Insured Amount – As of the date of the insured event, the insured amount is determined based on the remaining loan balance for that month, calculated in accordance with the repayment schedule under the loan agreement (or adjusted to the insurance period if the loan term exceeds the insurance term).

In the case of disability, additional conditions specified in the insurance contract regarding the payout amount may apply in accordance with the terms of the agreement.

Frequently Asked Questions
What is the primary purpose of credit life insurance, and which risks does it protect me against?

Credit life insurance is designed to safeguard a borrower’s financial obligations against unexpected risks such as death or loss of working ability. In the event of such circumstances, the remaining loan balance is paid by the insurance company, protecting both the borrower’s family and the lending bank from additional financial burden.

How is the insurance amount determined, and does it change throughout the loan period?

The insurance amount is calculated based on the loan amount, loan term, and the borrower’s personal factors, particularly age and health condition. As monthly loan payments reduce the outstanding balance, the insurance coverage typically adjusts in parallel and is updated in line with the remaining loan amount.
 

Is credit life insurance mandatory, or is it based on the customer’s choice?

Credit life insurance is not legally mandatory; however, most banks require it as a condition to minimize credit risk. Legally, the choice belongs to the customer, but in practice, banks may consider this insurance necessary for completing the loan issuance process.

How is the payment process carried out when an insured event occurs?

When an insured event occurs, your family members or legal heirs submit an official claim to the insurance company along with supporting documentation. After reviewing the documents and confirming that the event meets the insurance conditions, the company pays the remaining loan balance directly to the bank within a short period. This ensures that the loan is closed and your family is protected from additional financial burden.

Do heirs or family members bear any debt when the payment is made?

If an insured event occurs while credit life insurance is in force, the remaining loan balance is fully covered by the insurance company. Therefore, heirs or family members do not assume any debt and carry no financial obligations related to the loan.

How does early loan repayment or early contract termination affect the insurance?

When a loan is fully repaid early or the contract is terminated, the associated credit risk is eliminated, and the insurance coverage is considered automatically terminated. In this case, the insurance is no longer valid, and no further payments are required for subsequent periods. In some cases, a partial refund for the unused period may be possible, but this depends on the insurance company’s terms.
 

Which factors are considered when calculating the insurance premium?

The insurance premium is determined based on several key factors, including the loan amount and term, the borrower’s age, health condition, and overall risk indicators. Higher risk—such as larger or longer-term loans or an older insured person—may result in a higher premium. Therefore, the payment amount is calculated individually for each customer.

Is it possible to obtain or renew the insurance contract online?

Yes, many banks and insurance companies allow customers to obtain or renew credit life insurance online. During the online process, you enter your information, confirm the loan parameters, and complete the payment, after which the policy is issued electronically. This helps save time and makes the process more convenient and efficient.
 

Does the insurance payout cover only the principal amount, or are interest charges included as well?

When an insured event occurs, credit life insurance typically covers not only the principal amount but also the remaining interest charges. This means that the borrower’s full outstanding obligation to the bank—including the principal balance and accrued interest—is paid by the insurance company. As a result, the debt is considered fully settled, and the family does not bear any additional financial burden.
 

Does the insurance period have to match the duration of the loan agreement?

Yes, the term of credit life insurance is generally aligned with the duration of the loan agreement, as the purpose of the insurance is to cover the credit risk specific to that period. Once the loan term ends and the debt is fully repaid, the risk is eliminated, and there is no need for the insurance to continue independently.