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How Loan Protection Insurance Can Help Safeguard Your Savings


Published November 29, 2023 • 7 Min Read

Loan protection insurance is an added layer of financial security for you when the unexpected happens. Here, we answer your questions about this valuable insurance product.

Loans are one of many important financial tools that allow us to make big purchases, such as a new car, or take a long-awaited trip to visit family. And loan protection insurance can offer you security and protect a loan by helping you to pay all or part of the balance or to make regular loan payments if an unexpected event (such as an accident, illness, or death) happens.

Key takeaways

  • Loan protection insurance can cover your loan and/or line of credit payments or cover all or a portion of your loan balance if you are injured, become ill, or pass away.

  • There are different types of loan protection insurance, including life insurance, critical illness insurance, and disability insurance.

  • The cost of loan protection insurance is based on the balance on your loan, your age, and the type of coverage you choose.

  • Usually, applying for loan protection insurance can be done online, over the phone, or at your financial institution.

What is loan protection insurance?

Money-smart borrowers know how important it is to make loan and line of credit payments regularly and on time, but there may be situations in which they’re unable to do so. What if, for example, you experience a disabling injury that keeps you at home and unable to work for an extended period of time. Loan protection insurance can give you some comfort in knowing you’ve helped protect your loan in case of situations where you may find it difficult to make your regular payments. Depending on the type of insurance you choose, you can also be covered for certain critical illnesses and death.

How does loan protection insurance work?

When it comes to lines of credit and loan protection, you have options. Usually, there are three types of loan protection insurance you can choose from:

Life insurance

This is insurance tied specifically to your lines of credit and/or loans and is different from the kind of life insurance where benefits are paid to your loved ones when you die. This type of insurance can pay down or pay off the balance on insured loans or lines of credit if you were to die.

Critical illness insurance

In the case that you’re newly diagnosed with or experience a covered critical illness (for example life-threatening cancer, a heart attack, or a stroke), this type of insurance can pay off or pay down insured lines of credit and/or loans.

Disability insurance

If you’re involved in an accident or experience illness that results in your disability and prevents you from working, disability insurance can help ensure that your regular loan payments are made and/or that a predetermined percentage of your line of credit is paid.

Typically, this type of insurance does not pay off the full balance of your loan and/or line of credit, but it will make your regular payments until you recover or for a specified period of time. You’ll need to start making your payments again when you recover, when your insurance coverage ends, or when the maximum number of payments have been made.

The benefits of having loan protection insurance include:

  • Your savings may be protected, because you may not need to use them to make loan and/or line of credit payments.

  • Conveniently, premium payments are usually included in your regular loan and/or line of credit payments. Your other types of insurance may be preserved for other uses, such as supporting your family and loved ones.

  • Coverage is based on your outstanding balance.

  • Your benefits don’t require coordination with other insurance plans.

  • Your life, critical illness, and disability benefits are non-taxable.

  • The enrollment process is simple.

Who should consider loan protection insurance?

If you’re currently carrying a balance on your loan and/or line of credit, loan protection insurance may provide you with a degree of financial security should you experience disability, illness, or death.

How much does loan protection insurance cost?

Your specific premium will be calculated according to the balance on your loan and/or line of credit, your age, the type of coverage you choose, and the number of people insured under your policy (up to a maximum of two people including you ).

Who is eligible for coverage?

Each bank or financial institution will have its own requirements for eligibility. For RBC clients, individual borrowers and co-borrowers are eligible if they meet the following criteria:

  • For life insurance, the borrower must be under the age of 70.

  • For critical illness insurance, the borrower must be under the age of 56.

  • For disability insurance, the borrower must have been actively working a minimum of 20 hours per week on the date of application and must be under the age of 70.

Do I need loan protection insurance if I already have coverage through work?

Think of loan protection insurance as an added layer of financial security. In the event that you leave your job, become self-employed, or voluntarily decide to take some time off of work, your loan protection remains in place. Protection through an employer’s benefits plan might not be sufficient to satisfy your financial obligations, including making your loan and/or line of credit payments.

How do I apply for coverage?

If you have an existing RBC Royal Bank personal fixed or variable rate loan or Royal Credit Line®, applying for LoanProtector® Insurance* is simple and can be done online, over the phone, or at your local branch.

  • Online: Sign in to your RBC Online Banking account and click on your loan or line of credit. The next page will display your insurance status. Click on the link that indicates your status. This will take you to a new page, where you can follow the steps to apply for insurance.

  • Over the phone: Call our RBC Insurance Service Centre at 1-800-769-2523 to enroll. For Alberta and Saskatchewan clients, call RBC Royal Bank at 1-800-769-2511.

  • At your branch: Visit your local branch and ask to speak with a credit specialist, who can assist you with your LoanProtector® Insurance application.

  • RBC mobile app: Log in to your RBC mobile app and apply for LoanProtector® Insurance on the account details page.

How long will the approval process take?

Wait times for approval can vary. The process depends on the amount of total insured loans and your answers to the questions in the health questionnaire, if required.

Clients applying for coverage on loans totalling $100,000 or less are automatically approved without a health questionnaire.

Clients applying for coverage on loans above $100,000 must complete a health questionnaire. If any of the answers on that questionnaire are “yes,” additional health information will be required by the insurer, The Canada Life Assurance Company for LoanProtector® Insurance.

How do I make a claim?

Contact the Insurance Service Centre by calling 1-800-769-2523 to start your claim. You can also download a claim form from the FAQ section on the RBC website or visit your local branch for a claim form.

Be sure to continue to make your regular loan and/or line of credit payments until your claim has been approved.

If you have any questions about LoanProtector® Insurance, please visit our web page or call us at 1-800-769-2523.

*LoanProtector® Insurance is optional creditor’s group insurance and is underwritten by The Canada Life Assurance Company (Canada Life).

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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