We can define an insurance guarantor as a third party who endorses an insurance contract. Their function is to bear the liability of the party they are guaranteeing should they fail to meet the terms of the contract. To determine who your guarantor is, take a look at your policy declaration page. It is a document that contains vital information on your policy. For example, the first name insured would be the guarantor.
In a general context, guarantors endorse contracts; hence you have a guarantor outside of an insurance contract.
Another instance where you will be required to provide a guarantor is when you wish to take a loan from a financial institution or when you are given an offer of employment. In this case, the guarantor’s function remains the same as an insurance guarantor.
How Do You Determine A Guarantor
An Insurance guarantor is usually stated in your insurance contracts. Your policy declaration page or Insurance declaration page is proof of your insurance. It contains vital information regarding your policy with your insurance provider.
To determine who your guarantor is, take a look at your policy declaration page; the first name insured would be the guarantor.
Requirements For A Guarantor
Not anyone can be a guarantor; there are rules regulating who is qualified to act as a guarantor in a contractual arrangement.
Every organization has its requirements for selecting a guarantor; we tried to collate the most common requirements you can expect from any organization:
1. They must be 21 or older
2. They must possess excellent credit
3. Have a separate account from the subscriber/ borrower
Some companies have other requirements in addition to this. For example, certain companies would state that a guarantor should be financially independent of the guarantee. This would eliminate spouses or relatives acting as your guarantor.
Generally, anyone can be your guarantor. Friend, family, or coworker, you name it. Anything goes as long as they check off the guarantor requirements.
Importance Of A Guarantor
A guarantor acts as an additional level of security to your insurance policy. They assure the insurance provider that in a situation where you fail to meet up with your premium payment, they will be liable for the payment.
To become a guarantor for someone, you would have to enter into a contract. On this note, you cannot be a guarantor for someone without your consent. Therefore, it is essential that they formally request you to act as their guarantor, and you accept this request by being part of a contract.
If someone requests you to act as a guarantor for them, it is noble. It speaks highly of your character and how they view you. Through you, they can access services they ordinarily would not be able to.
However, it would help if you didn’t overlook the fact that it comes with risks and responsibilities. Failure to act when required could negatively impact your credit score. Therefore, it is advised that you only take up the liability you are capable and willing to cover.
Choosing A Guarantor
When entering into certain contracts such as insurance contracts, loan contracts, or even employment contracts, you will be expected to provide a guarantor. Your guarantor will assist you in obtaining your insurance policy, loan, or employment offer, as the case may be.
Remember that not everyone qualifies to be a guarantor, so when choosing a guarantor, you should ensure they check all the requirements listed by the insurance company.
The basic requirement is they should be of legal age, have a good credit score, and possess a bank account different from yours.
Another thing to consider when choosing a guarantor is to find someone you have a good relationship with; keep in mind that being a guarantor comes with huge responsibility and risk.
Normally, many people would not want to risk as they have nothing to gain from the contract. However, your relationship with them might prompt them to accept your request.
Frequently Asked Questions
We’ve made a list of the frequently asked questions and answers for better understanding.
Are Insurance Guarantors Different From Subscribers?
Yes, they are. The insurance guarantor is a third-party in a contract between a subscriber and the insurance company.
Is it possible to remove an insurance guarantor?
The answer to this is no. You cannot remove a guarantor from a contract after it has been signed.
This is because the contract is based on that guarantor’s specific qualities, such as their credit score.
However, if the policyholder or borrower settles, the company insurance provider can remove the guarantor from the contract. So, in essence, what we are saying is that the contract would have to end.
What Are the Risks Involved In Being A Guarantor?
Being a guarantor comes with risks, and it is advised you turn down a request to be one of you are not ready for the responsibility.
Firstly, you are liable to make repayments should the borrower fail. Therefore, do not agree to be a guarantor if you are unwilling to cover such costs.
Being a guarantor can also affect your credit score. This is because while you are not a beneficiary of the loan or the insurance policy, you are fully responsible for it.
Why Is The Guarantor’s Credit Score Required?
Remember that the guarantor’s function is to cover any default on your payment. Hence, the insurance company would like to know their financial status. If they have a good credit score, it will convince them that such individuals will act as a guarantor should the need arise.
Conclusion
Knowing who the guarantor is in an insurance contract is vital information to all parties involved, i.e., the insured, the insurance provider, and the guarantor themselves.
This is important because the guarantor is expected to cover the insured’s liability if he defaults.
If someone has requested you to be their guarantor, we advise you to think about it critically before accepting their request.