There are basically five different insurance products, that are available and should be considered when taking out a personal loan, regardless of whether the personal loan is a secured personal loan, say for a car or motorbike, or an un secured personal loan for debt consolidation or perhaps a holiday.

A question many people ask is Why have loan protection insurance products on their personal loan?

The answer is that many people are the people who need protection the most. In the event of that unforeseen accident / situation arising, how would you cope?

What would likely happen if one of life's unexpected events occurred?

No protection can be the cause of:

  1. Credit rating suffers, because the repayments are not met; either due to having to have a second loan, or because there is insufficient income coming into the household, because you have been laid off work. This is one of the biggest reasons people end up with a bad credit rating.

  2. Any holiday time and pay that has been saved up, quickly disappears, along with any sick time available.

  3. Any savings are eaten away, as the bills continue to come in, but the income does not.

Insurance products assist in maintaining your financial position, and credit rating.

The 5 insurance products are listed below. Life Insurance, Loan Protection Insurance, Comprehensive Insurance, Shortfall or 'Gap' Insurance and Warranty Cover.


Click on an insurance product for an explanation of what each one covers, then you can read about each one in more detail (feel free to use the 'print this page' feature, by clicking on the 'print this page' button at the top):

  • If the insured passes away the balance of the loan amount will be paid out.. more...

  • A loan protection policy covers the loan repayments if the policy holder cannot work due to accident or sickness/trauma, or become unemployed through no fault of their own. Life Insurance is technically part of loan protection. more...

  • Comprehensive insurance is required by law whenever the car is taken as security. If the car is involved in an accident, comprehensive insurance will pay for the cost of repairs. If the car is written off in an accident or stolen, comprehensive insurance will cover the amount the policy holder is insured for in the policy, regardless of whether the accident is their fault or not. more...

  • Shortfall insurance, or as it is referred to sometimes 'Gap cover' is a great policy. Now unfortunately and generally speaking a car will depreciate faster than a loan is paid off. For example, let's say the borrowed amount is close to the full amount for the car, and in 2 years time it is stolen. It is likely the loan amount will be more than the insurer's payout, so money will need to be found to pay the "gap or "shortfall". Gap cover insurance will pay this amount.
    The other good thing about Gap cover is not only is the loan paid out, but the policy holder will receive a cheque for up to $4k. This, in theory, is to go towards the 'on road' costs of the insured's next car or 'out of pocket' expenses incurred in the loss of their previous car.
    However there is no law telling the insured what to do with it. A lot of people put $1k deposit on their next car and $3k in their pocket for example. However, its main purpose is to protect the insured from having to make repayments on a car they no longer have. more...

  • If your vehicle suffers a mechanical failure, the insurer will help pay the costs of having the covered component repaired. more...