Six reasons to consider this insurance
A Guide to Loan Payment Protection Insurance
Loan Payment Protection Insurance is one of three common types of payment protection insurance (PPI). Payment protection cover is a broad classification of short-term insurance products designed to support people who become unable to work due to accident, long term sickness or unforeseen redundancy. It can sometimes be called ASU insurance (Accident, Sickness and Unemployment insurance)
The tax free benefits are typically paid out over a period of 12 to 24 months, depending on the loan payment protection insurance provider's plan (some run for 12 months, some run for two years'). The basic benefits and features of the payment insurance products are similar, but there are some subtle differences in their purposes and protection components.
Loan Payment Protection Insurance is designed to help sustain people through short-term periods of being unable to work by covering all their monthly loan payments along with a provision for small cover for monthly expenses. With debt rising perpetually in Britain, many people need help to meet their monthly obligations in the event of job loss or a loss of income while off sick. Loan payment protection insurance does not necessarily cover the insured's full income lost, but it does cover a significant portion of it. Loan payment protection insurance is often sold in combination with various loans by the high street banks and lenders. This practice has actually come under scrutiny in recent years thanks to some mis-selling practices used by some providers.
Another of the three standard payment covers is mortgage payment protection insurance (MPPI). This product is very similar in nature to the loan payment protection insurance, but its purpose is to help the insured meet their monthly mortgage requirements. For most people, the home is their most valued asset, literally and figuratively. Mortgage payment cover helps meet this primary debt obligation during covered short-term unemployment. As with the loan payment insurance, mortgage protection is commonly packaged with mortgage products by lenders looking for extra profits.
The third type of payment cover is income payment protection insurance. Again, the core benefits of this cover are similar to the other payment protection insurances. However, its purpose is simply to help offset a significant portion of lost job income. It does not cover the full income loss, but it does cover enough to help sustain many people through periods of job loss.
There is some confusion between income payment insurance and a product with a similar name, income protection. Actually, these products often are referred to with similar names and terms. Practically, they are completely different insurance covers with very different benefits. The income payment cover, as part of the payment protection portfolio is specifically short-term. Income protection is a more expensive, longer-term product that sometimes pays benefits up to retirement for some people.
Confusion has actually been a fairly common thing in the loan payment protection insurance industries. Consumer surveys regularly show that many Brits are both unfamiliar with the product benefits, and sometimes unaware as to whether they have the protection. The aforementioned mis-selling techniques used by some banks and High Street lenders have contributed much to the misunderstandings and uncertainty.
Loan Payment Protection Insurance – Quote and Apply
Much of the confusion stems from the common packaging of insurance and loan payment protection insurance products. While this business practices is not a problem in itself, it has led to some unethical practices. Some lenders have used pressure tactics to manipulate borrowers into believing they need the insurance in order to obtain the loan. Others have been even more deceptive and simply packaged the premium costs into the repayment of the loan. As this spreads the premiums out over time, it has helped lenders hide the expensive nature of their payment covers.
Another practice that is extremely unethical is selling of the loan payment protection products to people that are ineligible to benefit if an accident, illness, or involuntary redundancy takes place. Plans are designed to protection full time employed people. Retirees, part time employees, and people with pre-existing medical conditions, who are also not covered, have regularly been targets of insurance sellers who know these customers cannot benefit from the insurance they are selling to them.
In 2005 the Citizen's Advice, took action on behalf of Brits. The group submitted a super complaint to the Office of Fair Trading (OFT) alleging the mis-selling practices mentioned. The group said the current loan payment protection environment is extremely unfair to consumers and eliminates the benefits of open and fair competition.
Along with the OFT, the Financial Services Authority (FSA), got involved, and each conducted their own investigations. The FSA imposed several fines and sanctions on banks and lenders it had shown had engaged in unfair practices. This has helped to reduce some institutional mis-selling, although more recently, online lenders have been using some of the same techniques.
Loan Payment Protection Insurance – Apply Online
Perhaps the greatest benefit of the negative industry publicity has been improved consumer awareness about the benefits of loan payment protection insurance and the advantages of working with an independent insurance provider. Independent providers, historically, tend to be more focused on insurance products and providing consumers with the best plans. Their ability to work for consumers to offer the best plans and rates has given consumers much more power in the payment insurance marketplace. And as the consumer continues to get more savvy whne buying loan and other payment protection insurance cover, the large banks and High Street lenders will seen a drop in their ability to sometimes deceive consumers.
Consumers do need to take action to protect themselves during short-term unemployment stints. The State has largely withdrawn from unemployment assistance by providing little, if any, benefits – and only to those who meet strict eligibility criteria, meaning that individuals need to protect themselves. It seems Consumers are beginning to understand this need as about 60 per cent of new homeowners are acquiring some type of payment cover. This is strong growth considering only one in three Brit homeowners is currently covered.
Whether it takes the form of loan payment protection insurance, mortgage payment insurance, or income payment cover, payment protection offers great benefits to consumers who buy good plans on the open market. Standalone provider plans can be typically 40 to 80 per cent less than bank and High Street lender plans. This greatly enhances the value proposition for the insured from a benefit to cost perspective. Consumers need to protect themselves and their families during what would be an already stressful time.
