How do personal loans affect my insurance premiums, if at all?

Personal loans generally do not have a direct impact on your existing insurance premiums for life, health, or vehicle policies. Your current insurance plans and their premiums remain unchanged when you take a personal loan. However, many lenders in India now offer or recommend a loan protection insurance policy when you take out a personal loan. This type of insurance is designed to cover the outstanding loan amount in case of unforeseen events such as death, disability, or critical illness during the loan tenure.

There are 2 main types of personal loan insurance:

• Reducing cover: The premium and coverage decrease as your loan balance reduces over time making it more affordable.
• Level cover: The premium remains the same throughout the policy term, regardless of the outstanding loan balance.

The premium for loan protection insurance can be paid upfront or added to your EMIs, depending on the lender’s policy. Factors such as your age, health, loan amount, and tenure influence the premium amount. Older borrowers or those opting for longer repayment periods may pay higher premiums.

While the loan itself doesn’t change your existing insurance premiums, your overall debt level may be considered by insurers if you apply for new insurance policies.

Points to consider:

• Review your insurance coverage when taking a personal loan.
• Decide if a loan protection policy is right for your situation.
• Make sure your family is financially secure in case of unexpected events during the loan period.

Responsible planning ensures your loan does not add unnecessary financial risk to your household.