Loan life cover not a must: Bank

FINANCIAL institutions which provide loans are not required to have their customers take out a life insurance policy despite it being a wise thing to do, a Bank of PNG official says.
BPNG assistant governor Ellison Pidik told The National that making it compulsory for customers to have a life insurance policy would be an additional cost to them and the financial institution. Pidik was responding to a question on the need to make it mandatory for borrowers of large amounts to have a life insurance policy in place.
“At the moment, it is not mandatory because it is another cost to the company and the person who takes that,” he said.
“On that basis, the Central Bank would hesitate to make it mandatory as it is financial burden to those who borrow.
“Insurance is a very important safeguard, especially for loans that have long-term repayment plans.
“But it is entirely the choice of borrowers.
“BPNG encourages them to take life insurance cover along with their loans to cover themselves and their families in the event of a loss.”
Pidik said there was a need to have more awareness on the benefits of taking loans and life insurance covers.
“The issue may not have to be about making it mandatory for life insurance cover for certain large loan amounts but rather to have greater awareness on life insurance policies available that include cover for loans as well,” he said.
“For instance the borrower may be the bread winner of the family. And if he dies the liability will be passed onto the family members. And that will be detrimental to the surviving members.
“Life insurance policies allow for borrowers in the event that they pass away to have that cover, so loan repayments will not have an impact on the family in terms of financial pressure.”