INSURANCE AS A TOOL TO PREVENT AND REDUCE RISK OF LOAN LOSS AND REAL ESTATE MANAGEMENT

INSURANCE AS A METHOD OF LOAN SECURITY AND UTILIZATION AND REAL ESTATE ADVANCEMENT 

In this article, we shall be considering several factors that will help us build a better insurance policy relating to loan and Real Estate. But first lets highlights the keywords in this context:

1 Insurance

2 Tool

3 Risks

4 Loans

5 Real Estate

1 Insurance is a risk transfer mechanism that protects you of uncertainty or un foreseen events. Ever since, man has devised several ways to gain relief from losses when they occur, this is a pointer to the fact that man certainly does not like the burden of risk bearing and thus desire to transfer it. Insurance helps humans in diversity of life in the areas of life, marine, property /casualty, traveling, health and many others. Insurance will continually be important and necessary because man cannot bear all the risk alone.

   

Insurance is an arrangement by which an insured transfer its risk to the insurer at an adequate fee called premium on the concrete agreement that the insurer (insurance company) will indemnify or compensate the insured for the occurrence of the insured event in simpler form we can say:

a Insurance involves the transfer of risk

b Insurance is based on promise and agreement

c Insured shall be indemnified or compensated

d A premium must be involved.

2 Tool: According to Business dictionary.  An item or implement used for a specific purpose. A tool can be a physical object such as mechanical tools including saws and hammers or a technical object such as a web authoring tool or software program. Furthermore, a concept can also be considered a tool. "Creativity is the tool which allows a child's mind to grow."

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More also, a tool is something that serve a purpose either for repairs or as a medium for ensuring something is been done. When we relate this context in insurance, we can clearly say Insurance is a tool to get things done or probably insurance serves as a repair to something broken or may likely break and when it eventually does, insurance should serve as a tool if you as an insured insures you car against accident through an insurance company by buying a premium, when this event (car accident) actually occurs, insurance serve as a toll to redeem, indemnify, or compensate you on such loss.

Tool here means insurance used as a medium for insurers to connect with the insured and agreements that must take in place for this to be valid.

3 Risk: Risk is uncertain, expected and unexpected in which its end–up dangers are loss. Risk takes place in every human activity and has made it a source to worry for the inquisitive minds. Life itself is risk and high uncertainty of any event. Risk exist whenever the future is unknown, stressing the fact that everyone is a risk manager not necessarily willingly but by necessity.

In simpler form, we can say Risk is:

A The objective doubt concerning the outcome in a given situation

B Risk is the possibility of an unfortunate occurrence.

C Risk is unpredictable, the tendency that actual result may differ from the predicted result.

4. Loan: What we mean by loan is a sum of money a person borrows from a lender in actual agreement to pay with an interest in which a stipulated time is given of which when the borrower exceeds such time limit may warrant an increase in the loan interest or a fine which also might lead to a breach in the terms of agreement.

There are different purpose of collecting a loan of which at the end side of it should be one which can produce an additional income for the borrower or serve as a relieve in certain areas the borrower is in need of. A loan has a high risk of loss where the intention of collecting a loan is not achieved leads to debts or been prone to unexpected hazards and events such as robbery, Loan insurance is an aspect that is very crucial because man does not want to face the risk of losing any property therefore sort for ways by which the occurrence of loss can be transferred to a party which will help cover the whole loss or at least a part of it.

5 Real Estate Management:  Lawyers, law firms and real estate agents come to place when Real Estate Management is involved. A real estate agent serve as a middle man between the owner of a property   and the proposed buyer of the property. 

It is most times on lease where the estate owner offers his/her property for a given period and a sum to be paid by the lease. And other times, it is based on a monthly,  quarterly payments where the intention of the lease is to buy the property on an agreement usually a legal agreement between the buyer, lessor, and the agent usually lawyers. This is where the lawyers come in and they involve In activities like:

. Issuing documents as it relates to transfer of ownership without which every contract is legally invalid

. Standing for the party that was denied rights and amending every breach of contract

. And many other functions

Let’s now come to the topic of this article which is insurance as a tool for loan utilization and real estate management or Insurance as a tool to prevent and reduce risk of loan loss and utilization and real estate management. Now let’s break it down

1 insurance as a tool for loan utilization

2 insurance as a tool that helps in real estate management

1 insurance as a tool for loan utilization: having discuss briefly about loan, insurance helps an individual or a business organization to utilize loan for which the purpose of the loan must be observed and risk prevented. 

This is designed to help policyholders by ensuring support financially majorly in time of need whether this was due to disability or probably unemployment, taking up a loan insurance helps cover up your monthly loan payments and gives you protection from risk that any occur. In Britain, the loan policy comprises of different terms which are unemployment insurance, redundancy insurance premium or sickness insurance while in the US it is mostly called PPI which stands for Payment Protection Insurance.

HOW DOES THIS LOAN UTILIZATION WORK

Loan Insurance helps the policyholders meet their monthly debts upto the predetermined amount. It’s usually on short term basis ranging from 12-24 months and also depends on the insurance company and policy. The benefits attached to this policy can be utilized properly to clear off personal loans, credit cards, or car loans and this policy are for people usually from 18-65 who are on-job at the time the policy was taken up. For this policy to be effective, the purchaser has to be employed working at least 16 hours a week on long term basis or be a self employed for a specific period of time.

In essence we are saying Insurance helps in loan utilization by:

 a In tough times, loan insurance will take care of the outstanding loan amount in the case of death or disability resulting from a sickness or accident and also in-case you lose your job and by this it has helped you utilize your loan before and after usage.

b Incase of a credit life insurance, it pays off all or some of your loan if you die.

c Insurance as a tool that helps in Real Estate Management

WHAT  IS REAL ESTATE : Real estate is anything that consist of land and building, natural resources (crops, water or minerals) or housing in general. A real estate may contain either a single family or multi family structure that is available for occupation or for non-business purposes.

Real Estate Management: This is the control, oversight and operation of Real Estate. Real estate management indicates the need to be cared for, monitored and accountability given to its useful life and condition. In other words, Real estate management involves taking care of, maintaining, renovating and ensuring the property is been to put to order.

2 Where does insurance come in as a tool that helps in Real estate management?

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Insurance provides coverage for those who own properties who have lease or rent building space for offices, services business or retail stores. His real estate policy usually includes replacement insurance terms for reconstruction costs of repairing or rebuilding real estate that is damaged. In other words, real estate insurance is insurance of property, law and buildings. Source: Collins English dictionary

Insurance provides protection against most risk thereby when such events as fire, theft, and some weather damage occurs, insurance will help recover or replace any damages. If you own a real estate then having an insurance coverage for it will help you manage your property

(Read: Property insurance)

Most real estate insurance taker usually choose a specific amount ranging from a million – two million dollar on an average of $882.12 and this include general liability and property insurance. We shall be discussing this topic vividly as it is very broad and needs updating. Having discuss insurance involving in loan utilization and real estate management, we can now realize having insurance policies to help in real estate management and utilizing our loan is very important.

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