The figure of the insurance guarantor can be significant. They can be of great value to any policyholder in case of need. Insurance guarantors will be those who, if the insured is not able to pay bills or cover expenses on time, will respond so that they can satisfy their obligations.
Since this is such an essential element for anyone who is unable to pay their bills for one reason or another, it is crucial to understand who they are and what they do.
What does an insurance guarantor do?
Guarantors are not an unfamiliar figure in finance. Guarantors are those who provide the guarantee that another person or entity will respond to their payment obligations.
For example, in finances, the guarantor offers trust to a loan provider for him to offer finance to a third person. If this third-person does not meet their contractual obligations, the guarantor is responsible for repaying the credit.
Although it works somewhat differently in the case of insurance, the result is the same. The insurance guarantor will be the one who makes a payment or fulfills a contract if the insured has been unable to do so.
An excellent example of this is when an insured person has to assume the costs of medical bills. If they are unable to do so, the guarantor is responsible for the payment of medical services. This extends to other aspects, such as accompanying the patient and supporting the medical treatment process.
Are there different kinds of health insurance guarantors?
Yes, indeed. Just as there is no single need for a guarantee, there are different types of insurance guarantors. Usually, though, the guarantor can do so in any kind of matters.
A guarantor for people with a precarious income will not be the same as a guarantor for people with a bad credit history but a steady income.
If we classify them by the most usual types, we find two large groups:
The guarantor as Certifier
In this case, guarantors will provide support to the user who needs an ID or a license. This applies when the guarantor is used as a certifier when applying for driver’s licenses, passports, etc., including any legal documents needed by the user.
Guarantors, in this case, usually provide declarations or documentary signatures confirming the identity and supporting the application.
Guarantors with (or without) limitation
This would be the second major group of insurance guarantors. In the case of limited liabilities, those are quantified in advance. In other words, for example, a limited guarantee offers a response for a specific period or to a particular service.
This guarantee may be partial or total: it may cover the entire contract or part of it. As soon as the period expires or the service is provided, the guarantor’s liability is released.
In the case of the unlimited guarantor, the responsibility is different. The financial support is usually provided for the entire duration of a contract or agreement without limitation in time or amount. However, the amounts that are guaranteed typically have some limits and are agreed beforehand.
Of course, there is a big difference between the type of guarantee here, too. A guarantor for a health insurance contract, which may or may not cover a specific contract period in a limited manner, is not the same as a mortgage guarantor, who may act on behalf of the mortgage holder for the contract’s lifetime.
Is the insurance guarantor the same as the co-debtor?
Not really. They are figures that may look very similar, but they are different.
The co-debtor assumes a part of the payment obligation, usually because the principal borrower cannot assume the whole amount. For example, a house is purchased, and the owner’s income does not cover the full cost of the mortgage. In this case, the co-debtor assumes the corresponding part.
On the other hand, the guarantor will only step in if the person cannot meet their payment commitment. In other words, he does not assume a direct cost just because of his guarantee. For example, someone acts as a guarantor for a rental contract: if the rent is paid on time, the guarantor does not have to be involved.
Who can be an insurance guarantor?
This is an important aspect as it can be confusing. Firstly, we must distinguish between a guarantor in a private capacity and guarantors in a legal form, i.e., companies.
The basis for a guarantor must always be the same:
- Be old enough (21 years old).
- Have good financial stability.
- Have an impeccable credit history.
Without these three basic requirements, it is impossible to be a guarantor.
It is also essential to have a good relationship between financial solvency and the guarantee to be provided.
For example, in the case of a mortgage guarantee, at least three times the amount of the collateral is usually required as the guarantor’s stable income.