Education Loan Insurance

Studying abroad or in India can be a life-changing experience, but it often comes with a hefty price tag. Many students rely on education loans to finance their studies, and one crucial aspect to consider when taking out such loans is education loan insurance. 

In this article, we will understand the minute details of education loan insurance in India, exploring its significance, necessity, and the various aspects associated with it.

Education loan insurance protects students and their families in the event of unforeseen circumstances such as the student's disability, critical illness, or demise. It serves as a safety net, ensuring that the burden of repaying the education loan does not fall entirely on the student or their family in case of an unfortunate event.

Education loan insurance is a type of insurance policy that covers the education loan taken by a student. It provides financial protection to the student and their family in case of any unforeseen events that may prevent the student from repaying the loan. The insurance policy covers the outstanding loan amount, and the insurance company pays off the loan in case of the student's disability, critical illness, or demise.

Government banks in India generally do not mandate education loan insurance, while Non-Banking Financial Companies (NBFCs) and private banks offering unsecured study-abroad loans often require it. The requirement for education loan insurance varies among lenders, highlighting the importance of understanding the specific policies of different lenders when considering education loan insurance.

It is essential to research and compare the policies of different lenders before taking out an education loan. Some lenders may offer better insurance coverage or lower insurance fees, making them a more attractive option for students. Understanding the nuances of education loan insurance policies can help students make informed decisions about their education loans.

The loan insurance fees are directly proportional to the length of the education loan tenure. The lower the loan tenure, the lesser the loan insurance fees. Understanding this relationship can help students make informed decisions about the tenure of their education loans and the associated insurance costs.

The loan tenure is the period for which the education loan is taken. The longer the loan tenure, the higher the interest rate and the loan insurance fees. Students should consider the tenure of their education loans carefully, taking into account their financial situation and the associated costs.

Government banks generally offer loan insurance schemes provided by their in-house loan insurance lenders, with insurance amounts ranging from 0.5% to 1% of the entire education loan amount. Private banks and NBFCs may have different insurance amounts, with private banks typically charging 1.5% and NBFCs charging 2% of the total abroad study loan amount. Understanding these variations is crucial for students when evaluating different lenders and their education loan insurance policies.

It is essential to research and compare the policies of different lenders before taking out an education loan. Some lenders may offer better insurance coverage or lower insurance fees, making them a more attractive option for students. Understanding the nuances of education loan insurance policies can help students make informed decisions about their education loans.

Education loan insurance is not mandatory if you are going through public lenders as you will have to pledge your collateral against your education loan. Still, we insist you should take an education loan from public lenders as public lenders like SBI offer concessions if you opt for Rinn Raksha loan insurance.

For students seeking unsecured education loans, education loan insurance is often a mandatory requirement, especially with NBFCs and private banks offering unsecured study-abroad loans. This is because private banks and NBFCs mostly deal with unsecured education loans where students do not need to pledge any collateral, making education loan insurance a crucial risk mitigation tool for them.

Unsecured education loans are loans that do not require any collateral security, such as property or assets, in return for the loan. These loans are riskier for lenders, as they do not have any security to fall back on in case of default. Education loan insurance provides a safety net for lenders, ensuring that they can recover their loan amount in case of an unfortunate event.

Education loan insurance offers a sense of comfort and relief to both students and their families, especially in the face of the substantial financial responsibility associated with education loans, particularly for studying abroad. It may offer waivers in interest rates, providing financial relief to borrowers, and in the unfortunate event of a critical injury to the student, the insurance company may pay off the entire education loan amount, alleviating the burden on the student and their family.

Education loan insurance provides a safety net for students and their families, ensuring that the financial burden of an education loan does not fall entirely on them in case of an unfortunate event. It offers peace of mind to students and their families, allowing them to focus on their studies and enjoy their experience abroad without worrying about the financial implications of an education loan.
Here are the top benefits of purchasing education loan insurance.

• Students will no longer need to worry about the liabilities to pass on to their family members in case of their death or disability
• Students will have income tax benefits under sections 80(C) and 10(10D)
• Special discounts in education loans like Rinn Raksha offer a concession of 0.50% in interest rate if they opt for insurance.

The role of study abroad insurance, including education loan insurance, is pivotal in protecting the investment in one's education. It provides a safety net for students and their families, ensuring that the financial burden of studying abroad is mitigated in case of unforeseen events.

Studying abroad can be a life-changing experience, but it also comes with its own set of risks and challenges. Education loan insurance provides a layer of financial security, protecting students and their families from the financial implications of an unfortunate event. It allows students to focus on their studies and enjoy their experience abroad without worrying about the financial burden of an education loan.

Once students decide to buy insurance for their education loan, they might wonder if they need to pay for it right away. Here's the good news: Candidates don't need to pay separate fees for education loan insurance. Instead, these costs are included in the total amount of the education loans students take out.

For instance, let's say you applied for a loan of INR 40 Lakhs and the insurance adds up to INR 40,000 (i.e 1% of your loan amount). Instead of giving you INR 40 Lakhs, the approved loan amount becomes INR 40.4 Lakhs, covering the insurance. This means you won't need extra money to cover the loan insurance.

Another thing to keep in mind before getting a study abroad loan insurance is that the insurance fees depend on how long you'll take to repay the loan. If you opt for a shorter loan period, the insurance fees will be lower.

WeMakeScholars is an organization that was established to offer unbiased education loans to students wanting to pursue quality higher education in India or abroad. While taking an education loan you can consider taking it through WeMakeScholars for all the information on education loans and on insurance. Here are the other benefits of applying through WeMakeScholars.

• Lower rate of interest: We at WeMakeScholars are partnered with 14+ banks(Public/Pvt) and hence can offer education loans at up to 2% lower rate of interest than when you go through them directly.
• Faster process: We process education loans in 50% less time than when you go through the banks directly.
• End-to-end support: We provide support to students right from the education loan process until the repayment of the loan. We talk to the lender about any issues that the student faces even in the repayment phase.
• Cashback: Students going through us are eligible for a cashback of up to ₹3000.