The cost of studies, both in India and abroad, keeps growing steadily. Most students rely on educational loans in order to survive and carve out a career for them through studies. But taking a loan comes with financial strings, and in case of any unfortunate incident, it can become a burden for them. That is when educational loan insurance comes into play. It acts as a security cover, safeguarding the borrower’s family in case of any unfortunate incident and not burdening them with a financial loss.
What is Education Loan Insurance?
Education loan cover is a scheme of financial security that covers payment of an educational loan in case of:
- Death of the borrower
- Permanent disability
- Impairment of Repayment Ability through Illness
Many financial and banking companies demand or even insist on having a loan insurance in a bid to secure funding and provide lenders with assurance.
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Why is Education Loan Insurance Important?
- Protects co-applicants (usually parents/guardians) from loan burden.
- Ensures that the loan is repaid even in unfortunate circumstances.
- Provides security to financial institutions, reducing the risk of defaults.
- Offers minimal premiums compared to other insurance plans.
Read more: How to Get an Education Loan Without a Co-Applicant?
How Does Education Loan Insurance Work?
- Who Provides It? Banks, NBFCs, and third-party insurers.
- Premium Payment: Either one-time upfront or periodic payments.
- Cost Determinants: Loan amount, tenure, and borrower’s age.
Types of Education Loan Insurance in India
| Type of Insurance | Description |
| Reducing Cover Term Insurance | Coverage decreases as the loan balance reduces. |
| Level Term Insurance | Fixed sum insured throughout the loan tenure. |
| Group Insurance Plans | Banks offer group policies for loan borrowers. |
Read more: Understanding the Importance of CIBIL Score for Education Loans
Key Features & Benefits
- Financial security for co-borrowers
- Simplified claim process
- Lower premiums compared to traditional life insurance
- Loan repayment assurance for banks and NBFCs
Is Education Loan Insurance Mandatory?
- RBI Guidelines: Not mandatory but recommended.
- Bank Policies: Some banks like SBI, HDFC Credila, and Axis Bank require insurance for high-value loans.
- When It’s Optional: Smaller loan amounts may not require insurance.
How to Choose the Right Education Loan Insurance?
Key Factors to Consider:
- Rates – Premiums Comparison between Insurers
- Coverage Perks – Check for disability, illness, and death
- Claim Settlement Rate – Have a high claim settlement ratio vendor
- Terms & Conditions – Check out the fine print first when purchasing
Cost of Education Loan Insurance – Is it Worth It?
- Education cover tends to cost 1-2% of the value of the overall loan.
- For a loan of ₹20 lakh, an insurance fee can range between ₹20,000 and ₹40,000.
- The single payment covers financial security for the whole period of the loan.
Read more: Foreign Remittance Tax: Understanding Tax Implications for International Money Transfers
Top Banks & Financial Institutions Offering Education Loan Insurance
| Bank/NBFC | Insurance Partner | Premium Type |
| SBI | SBI Life Insurance | One-time payment |
| HDFC Credila | HDFC Life | Periodic premium |
| Axis Bank | Bajaj Allianz | One-time payment |
| ICICI Bank | ICICI Prudential | Optional |
Common Myths About Education Loan Insurance
- “It’s an unnecessary expense.” → It protects families from financial strain.
- “Only banks provide this insurance.” → Private insurers also offer loan insurance.
- “It covers job loss.” → Most policies cover only death, disability, or critical illness.
How to Apply for Education Loan Insurance?
Step 1: Choose an insurance provider (bank/NBFC or third-party insurer).
Step 2: Compare premiums and benefits.
Step 3: Submit the required documents (loan details, KYC, medical reports if needed).
Step 4: Pay the premium (one-time or periodic payments).
Step 5: Receive the policy certificate.
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Alternatives to Education Loan Insurance
- Term Insurance vs. Education Loan Insurance – Term insurance provides higher coverage but may require medical tests.
- Personal Savings & Investments – A financial backup can help cover repayments.
- Loan Repayment Protection Plans – Alternative policies that offer similar benefits.
International Money Transfers for Education – How moneyHOP Helps?
When studying abroad, students often need to transfer tuition fees and living expenses internationally. Traditional bank transfers can be slow, expensive, and come with hidden fees. This is where moneyHOP simplifies the process.
Why Choose moneyHOP for International Money Transfers?
- Lowest Exchange Rates – Get competitive rates with no hidden charges.
- Fast & Secure Transfers – Quick processing, ensuring on-time fee payments.
- Fully Digital Platform – Seamless online transactions without paperwork hassles.
- 24/7 Customer Support – Assistance at every step of your transfer.
- Regulatory Compliance – 100% RBI-approved for secure transactions.
Why pay more for international money transfers when moneyHOP is here?
- NO hidden fees
- ZERO convenience fees
- Real-time updates
- Lowest exchange rates
Conclusion
Education cover is a significant financial protection for students and parents. As a cover, it provides confidence and keeps a student’s future secure in case any unfortunate incident occurs in case of any financial loss in future studies. By comparing cover, reading terms and conditions, and selecting reliable financial service providers such as moneyHOP for cross-border payments, students can have studies free of financial tension.
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