Insurance reduces the risks of late payment in the event of unforeseen events such as death.
Borrowing money means that you are entering into a financial obligation. You can take out insurance to reduce or exclude any risks that could jeopardize the fulfillment of the payment obligation. At the time of your loan application, the lender looks at your situation; they may or may not grant you a loan based on this situation. (Major unexpected) events that occur after the loan has been taken out are not taken into account. How do you avoid being unable to pay off the current loan?
You want to prevent that you cannot meet your monthly payment obligation, but what do you do if your income falls or is lost? For example, you will work less or you and your partner will get a divorce. Or you become incapacitated for work or unemployed. How do you handle this financially? If you die, your debt will even pass to your next of kin. You can prevent this with a life insurance policy .
Sometimes term life insurance is automatically linked to the loan or credit. If this is not the case, you can take out insurance yourself so that you take out a responsible loan to the exclusion of major risks. After all, you want to pay off your loan so that you are debt-free on the maturity date. If you cannot meet your payment obligation and there is a payment arrears, a negative BKR registration will follow. You want to prevent that.