The unexpected death of a primary earner can leave families with unpaid loans, including home mortgages, personal loans, education loans, and credit card dues. Debt protection in term insurance provides a way to address these liabilities and reduce the financial burden on surviving family members.
“Debt protection acts as a safety net, allowing your family to pay off outstanding loans without disruption to daily life,” says Ashok Manwani, Vice President – Products, Go Digit Life Insurance.
How debt protection works?
Debt protection is usually available as an optional rider with term insurance policies. Policyholders can select coverage that allows a portion of the sum assured to be used specifically for clearing debts in the event of death.
Coverage can be adjusted to match total liabilities, including mortgages, car loans, and education expenses.
Who needs it most?
- Primary breadwinners: Families depending heavily on one income should consider this rider, as its absence could leave debts unpaid.
- Young families with big loans: New homeowners or individuals carrying business loans face greater financial risk.
- Co-signed debts: If loans are co-signed, debt protection ensures the responsibility does not shift to family members.
Key benefits
- Financial stability: Avoids forced asset sales or disruption of lifestyle and education.
- Cost-effective: The rider’s premium is usually low compared to its protective value.
- Protects your legacy: Ensures that assets like property and savings remain with the family.
- Easy to claim: Insurers focus on fast debt settlement for smooth claims processing.
Integrating debt protection into your financial plan
Experts recommend assessing all liabilities before selecting coverage.
“To meet long-term loans for homes, vehicles, education, and personal needs, taking a debt protection rider on a term plan is recommended,” says Rajeev Chugh, Chief Financial Officer, Generali Central Life Insurance.
“Rather than liquidating property under pressure or cutting family expenses, the insurance payout clears the debt, preserving financial stability and dignity,” he said.
Policyholders should review their coverage regularly to ensure it matches current financial obligations and consider pairing debt protection with riders for critical illness, permanent disability, or waiver of premium.
Ashok Manwani adds: “Debt protection transforms financial planning from a reactive measure into a proactive legacy, giving policyholders the peace of mind that their loved ones are financially taken care of.”
(Edited by : Shoma Bhattacharjee)