Six reasons to consider this insurance
A guide to Loan insurance
It's come to something when an entire market is reported to the regulatory bodies for unfair trading. Yet this is precisely what's happened in the case of Loan Insurance and the rest of the payment protection insurance (PPI) industry In February 2007, the Office of Fair Trading reported this highly lucrative sector of the insurance industry to the Competition Commission. For its part, the Commission has embarked on a thorough investigation of the way loan payment protection insurance is sold, has already published some disturbing preliminary findings and is due to publish a detailed report in February 2009.
In fact, the case has already been made strongly enough for thousands of consumers to demonstrate that they were mis-sold Loan Insurance in the past and, on the basis of that mis-selling, are justified in demanding a full refund of all the premiums they've paid.
So, if you believe you have been a victim of loan insurance mis-selling, there's never been a better time to make your complaint, reclaim all that you've paid to date and switch to an alternative, independent insurance provider who won't pull the wool over your eyes or attempt to sell you a policy for which you might be ineligible or which leaves you seriously under- or over-insured.
Loan Insurance – Quote and Apply
This is not so much a case against the product, but the way in which it has been sold. Indeed, when it's bought with your eyes wide open, and you're in possession of all the material facts about the cover offered and the price of the premiums, it makes a good deal of common sense to protect your commitment to repaying any loans against the possibility of a disruption to your income through sickness, accident or unemployment.
The problem is that loan payment protection insurance has been a very lucrative product for the lenders themselves to sell their borrowers – a doubly lucrative product. On the one hand, it protects the lender just as much as the borrower if the latter experiences difficulty in repaying the loan through any loss of income following sickness, accident or unemployment. But the real bonanza for many lenders has come through being able to sell overpriced loan insurance to a captive market.
Evidence has been given to the Competition Commission that many lenders insist their borrowers take out loan payment protection insurance cover as a condition of being granted a loan. In some instances, customers have been (quite wrongly) advised that such cover is some form of regulatory requirement and in others that the purchase of such insurance will significantly increase their chances of securing a loan. In the worst cases, loan payment protection insurance has been added to the loan repayment itself, without the knowledge of the unsuspecting customer.
As the loan insurance salesman insists that it makes things so much simpler if the payment protection insurance is added to the monthly repayment of the loan, he regularly omits to explain that by adding the cost of the insurance to the loan, the customer's actually paying interest on the insurance premiums as well as the loan itself!
Clearly, tricks like this make it extremely difficult for the consumer to work out exactly how much he or she is paying for the loan insurance cover. Another common ploy, used to disguise the overpricing of the policies sold directly by many lenders is the so-called “single premium” payment protection insurance policy. As the name suggests, this involves the payment of all the insurance premiums upfront, in one single premium at the commencement of cover. Not only does this make it very difficult to work out exactly what you're paying for the insurance, but since it is likely to be added to the total outstanding loan amount, you're likely once again to end up paying interest on the insurance premiums.
Probably the biggest single disadvantage with loan insurance cover bought directly from the lender, however, is simply its price. Countless impartial investigations by groups ranging from the Consumers Association Which? Magazine to the Office of Fair Trading and the Competition Commission have time and again demonstrated that the insurance bought directly, at the point of sale, is consistently more expensive – and sometimes double – the standalone cover bought from independent insurance specialists.
Loan Insurance – Apply Online
Because the independent loan insurance providers provide an alternative source of purchase for standalone loan payment protection insurance cover, there is still hope for this intrinsically very useful and valuable product. Not only is there hope for it, but the independent loan insurance providers (in other words, the ones who have no vested interest in the lending process, since they issue no loans or mortgages themselves) will be able to arrange the cover for a fraction of the price that you'd be paying if you bought direct from a high street lender.
No one knows when a sudden bout of illness, an injury or period of unemployment is going to dry up your normal source of regular income and make it difficult to keep up the monthly repayments on a loan. Loan insurance will ensure that the commitment is met and save you the enormous hassle and the problems that would follow if you were to default on your payments – namely, an adverse credit report, a county court judgment against you, or even worse.
Despite the traps and pitfalls of being ripped off by one of the high street lenders, therefore, loan insurance cover is a sensible and prudent precaution. Being forewarned about the sharks out there is being forearmed. So, if you've been unfortunate enough to have been hoodwinked into buying an inappropriate and expensive form of cover in the past, now is the time to claim your refund from the mis-selling merchants and switching your cover instead to one of the reputable, no-nonsense independent providers, who will ensure that the standalone loan payment protection insurance cover you need is the one you'll get – and all at an affordable price.
