Banks and local financing institutions, under the direction of the Central Bank of Kuwait, are promoting life insurance among borrowers.
Under the insurance policy, the insurer makes a payout amounting to the outstanding loan balance of a customer after his death. The coverage is limited to the risk of death of the borrower and does not cover any loan default due to other reasons, reported Al-Rai.
A regulatory directive states that the life insurance coverage is an option for the customer.
If the client agrees to the coverage, he bears half the cost of the life insurance policy. The insurance premium payable by the customer must not exceed 2% of the loan, taking into consideration that the total insured value decreases with the decline in the loan balance as the customer pays instalments on the loan.
However, some banks have decided to bear the entire insurance premium, as they attempt to woo customers. Thus, even if the customer does not opt for the insurance, some banks will acquire the coverage.