If my parents die and they had debts, do I inherit them?

Facing the death of a family member is a painful process; concerns increase if that loved one had debts with the bank. You wonder if it is possible that now you have to be responsible for the payment to the banking entities. According to the Superintendency of Banking, Insurance and AFP (SBS), the answer to this question is found in credit life insurance.

In the following note we explain what this insurance is, how it is related to the loans (vehicle, mortgage, consumer credit or to process payment cards) that any citizen can acquire and how it benefits their heirs.

Can I inherit my deceased parents’ debt?

If a family member dies and had debts with the bank, the credit life insurance frees heirs from the obligation to pay the loan. According to the SBS, it is insurance that covers the debt contracted with a banking entity in the event of death or total and permanent disability. The entity emphasizes that the price of the insurance is calculated based on the outstanding balance of the loan.

What type of coverage does credit liability insurance offer?

There are two types of credit life insurance. The first ensures the balance of a debt; That is, “if the credit holder dies or is left with a permanent and total disability – which does not allow him to generate income -, the insurance company automatically takes charge of the absolute debt balance and the family members do not have to pay anything,” he explains. Eduardo Chávez, legal manager of the Peruvian Association of Insurance Companies (Apeseg), in an interview for La República.

A second type is the tax deduction with return. “If the person dies or becomes totally and permanently disabled, and cannot generate income, the insurance company writes two checks: one in the name of the bank for the balance of the debt and another second check for the difference with respect to the initial amount in favor of the person’s legal heirs,” adds the Apeseg spokesperson.