Definition - What does Loan mean?

A loan is a sum of money that is lent from one party to another with the condition that the borrowing party will repay the money plus interest by a certain date.

Insurance policies are often purchased to protect against the possibility of default when a borrower takes out a loan.

Insuranceopedia explains Loan

Mortgage insurance is a prime example of insurance that protects against losses due to a default. It is often required by mortgage lenders before giving the borrower approval for the loan.

If a mortgage borrower has mortgage insurance, they will have a certain amount of coverage in the event that they default on the loan repayment. This reduces risk for the lender.

Connect with us

Insuranceopedia on Linkedin
Insuranceopedia on Linkedin
"Insuranceopedia" on Twitter

Sign up for Insuranceopedia's Free Newsletter!