What happens to the Government Agency loan in the event of death or disability
The Social Security ex Government Agency loans are produced at subsidized conditions granted by Social Security in favor of employees and pensioners of the public administration. Characterized by subsidized interest rates, Government Agency loans can be requested to meet both small and large expenses. But what happens to the Government Agency loan in the event of death?
Employees and pensioners who take out a small loan or a multi-year Social Security ex Government Agency loan are protected by the social security institution. In fact, upon entering into the loan agreement, the beneficiaries also undertake to pay a premium to the Social Security Risk Fund.
Fund through which Social Security provides coverage to the civil servant or pensioner in the event of death. The beneficiary is also covered in situations that make it impossible for him to repay the amortization installments. What happens in these cases?
Multi-year loan and small Government Agency loan in the event of death
How does the coverage provided by Social Security work? Specifically, in the event that the beneficiary of the loan dies before the loan is fully extinguished, Social Security does not proceed against the heirs. In other words, for the Government Agency loan in the event of death, the children or the surviving spouse of the public employee or pensioner are not required to repay the amount still due.
The same happens if the employee or pensioner receiving the loan is subject to absolute and permanent disability. Disability that can be contracted both in service and due to service.
In these cases, Social Security extinguishes any obligation towards the Unitary Management of credit and social services (Social Security Credit Fund). The beneficiary is therefore relieved of the payment of the residual debt, that is of the sum still due as a loan and of the interest applied on the capital.
Insurance in the event of death and insolvency of Social Security guaranteed loans
What has been said so far only concerns direct Social Security ex Government Agency loans. Loans that are granted directly by Social Security through a specific Credit Fund, the Unitary Management of credit and social services. Public employees and retirees can also get guaranteed Social Security loans.
Products that are supplied by banks and financial institutions affiliated with Social Security and at the same time covered by an insurance guarantee. Insurance provided directly by the social security institution. Social Security, in fact, covers the loan against the risks of:
- death of the beneficiary before the total repayment of the debt;
- reduction of the beneficiary’s salary ;
- termination of service without being entitled to a pension.
Specifically, the Government Agency loan in the event of the death of the beneficiary provides for the repayment of the amount still due to the transferee institution. Instead, the intervention of the Social Security in the event of termination of service without having the right to a pension.
Hypothesis in which the institution redeems the loan and returns the residual debt to the lender. Whenever possible, Social Security recovers these amounts from the loan recipient’s severance pay. Finally, in the event of a reduction in salary, Social Security redeems the loan and repays the remaining debt to the bank or financial institution that granted it.