You do not have to take a policy alongside the borrowing. You can choose to shop around and look for the cheapest quotes. By going with specialist providers for the quotes, you are able to make huge savings and get essential advice. An ethical provider will make the information needed available before buying so the consumer is able to make the right choice. They supply articles and FAQs and these should be read beforehand. It is essential that you understand what you are buying if you expect it to work in the way it was designed.
Loan payment protection is taken out by those who fear they might become unemployed or suffer illness or accident that meant they were unable to work. If this were to happen during the loans duration, they would be left struggling to find the money needed to continue meeting their repayments. This would mean that at the very least you would earn a bad credit rating. In the worst case, you could find bailiffs taking your possessions to cover the amount owed on the loan. In the case of a secured loan, you could even lose your home to repossession.
Loan payment insurance would give you the money needed after a period of waiting. This is usually between the 30th and 90th day of being unemployed or unfit for work. Some providers will backdate their cover to day one, which means you do not lose out. The policy would then continue to provide a tax-free income for between 12 and 24 months depending on the terms and conditions of the provider. These must be read as they also contain the exclusions that can apply.
Loan payment insurance can be valuable protection even though there has been a lot of bad publicity surrounding it. Faith has been lost in all payment protection products since the Financial Services Authority started an investigation into the sector in 2005. This happened after a super complaint was made to the Office of Fair Trading by the Citizens Advice. Following this several well-known names on the high street received fines and the investigation continues. Currently the Competition Commission are conducting an in-depth review of the sector.
There have been some changes for the better when it comes to payment insurance and more will be seen in the future. Comparison tables are to be introduced which will help the consumer choose the right type of payment protection. Loan payment insurance provides an income for your loan repayments. However there other types of protection policies that could be more suitable. The tables will take the consumer through a series of questions and answers that then leads them to making the right choice. They will also highlight the cost of the policy and any exclusions.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan payment insurance , mortgage protection insurance and income protection insurance.
