By choosing to take out loan insurance independently you will usually get all the information needed to decide if would protect you in the way it was designed. While there has been a lot of bad publicity surrounding payment protection products it is not the actual cover that is at fault. It is the lack of understanding that a policy does not suit all which causes problems as well as the high premiums that many high street lenders charge.
Providing you realise there are exclusions in all loan insurance policies and have checked them against your circumstances you could have peace of mind. Some of the most recurrent exclusions which can be found include not working full time, being self-employed, suffering a pre-existing medical condition or being of retirement age. You do have to read the wording of the terms and conditions because providers can specify others.
The majority of loan insurance offered by specialist providers would begin to give you a tax free income from between the 31st and 90th day of being unable to work due to redundancy, illness or accident. Cover would give you a monthly lump sum which would mean that you are able to continue meeting your monthly loan or credit card repayments without a struggle. This income allows the policy holder to concentrate on getting better and back to work.
In the majority of cases protection will be offered by the high street lender at the time of borrowing. However, historically, cover taken this way has been known to be expensive. In some cases it has been reported to have boosted up the cost of the amount borrowed by almost half again. The cheapest way to get the protection you need is to go with an independent specialist provider. While some lenders do ask that you protect your loan repayments, it should not be dependent on you taking cover at the same time. You always have the option of choosing to take out the cover independently.
The high cost of loan insurance is just one of the many problems that the Financial Services Authority and Competition Commission are looking into. It is thought that high street lenders are currently bringing in around £4 billion in profits from the sale of cover alongside cheap loans. However they are remaining tight lipped, but the Competition Commission say they will use their powers to make the high street lender come clean.
There are many factors that have to be considered when buying cover. The premiums are a concern and of course while you want the cheapest you also need quality cover. The expensive cover offered by high street lenders is not particularly of better quality because it is more costly. In fact cover bought cheaper with an independent provider often has many additional benefits.
Loan insurance can give peace of mind and it can ease the worry of continuing to meet the commitments of your loan. Taking the free advice and reading the key facts supplied with a policy that the specialist offers goes a long way to helping you make an informed choice of ensuring that your loan repayments will still be met if disaster struck .
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan insurance, mortgage payment protection insurance and income protection insurance.
