Six reasons to consider this insurance
A guide to Loan Protection Insurance
Borrowing is a fact of life. Not many of us can get by without having to take on a debt at some point. Whether we will always be able to pay it back is another matter. What's more we could find we are unable to pay back a credit card, store card, or similar debt because our income has been lost due to poor health, involuntary redundancy or as a result of an accident that means you are out of action. It's here that Loan Protection Insurance can help.
Also called payment protection insurance (PPI) or loan payment protection insurance, it will cover some or all of the payments on cards and bank loans you can't make while unexpectedly out of work and without an income. Remember that, although this type of policy has these three different names in the market, they all refer to the same type of insurance. It's a broad market as well – with well-known high street providers not always providing the best deal. Smaller independent firms may be able to get you a cheaper premium. A successful claim will mean a lump sum is paid to you, tax free, each month for a period of time to help you carrying on paying the card bills that arrive through the letter box.
But the reams of text accompanying policies can be confusing, and the payment protection insurance industry is still under investigation from the Competition Commission after some providers were found to be mis-selling policies. But having the rug pulled out from under you if you can't keep up your payments can be unpleasant – hopefully this guide to why buying a Loan Protection Insurance policy will help.
Loan Payment Protection Insurance – Quote and Apply
Know your cancellation rights if you change your mind – there is what is known as a 'statutory cooling off period' of 30 days. If you do decide you don't want a policy you have taken out you can just say so and you should be entitled to a full refund of the premium paid. However, if you have made a claim and then cancel in this period your insurer may well seek to recover anything paid out to you to settle the claim.
Even if you go past that 30 day period you may still be able to scrap your loan protection insurance policy. If your cover came from a standalone specialist insurer, you can often cancel by writing to your insurer, giving 30 days worth of notice. But if you took out the cover with the bank you got the loan from, you could be in a bit more difficulty.
Different high street names often have quite different loan protection insurance policies. A lot of them will tack the premium on to the loan and charge interest on the total – this means if you are taking out a £20,000 loan and your cover costs £4,000, you are in fact borrowing £24,000. Often, cancelling the policy will mean you have to scrap the loan as well- ask the bank for a figure you can pay them that would enable them to do this
Loan Protection Insurance – Apply Online
There's plenty of catches as far as claiming because of an accident or illness are concerned as well. Some of the usual ones are - no pay outs if you claim on a condition you knew about before the start date, are off work because of cosmetic surgery, or because you are in prison, unless, of course, if you are later acquitted. Your own 'wilful actions' are also often mentioned, often applying to a period of time off work due to drug or alcohol abuse. This will not typically include drugs prescribed by your doctor, unless they were given to you to treat drug addiction.
Involuntary redundancy will probably mean exactly what it says, meaning you will not be able to claim money for loan payments if you are unemployed and you knew you would be beforehand – whether you were handed an official notice or not. Some companies will put a holding period on after the policy starts, which must expire before you can claim because of redundancy – usually about 90 days. Anyone who is unemployed because they have been sacked are also unlikely to be able to lodge a successful claim.
Some loan protection insurance policies will cover your loan payments if you have to give up work to become a full-time carer for a loved one, which must be a member of your immediate family. This will often be for a limited time, around 12 months, and they will usually not start paying out until a month after you became a full-time carer, although it may be back dated.
Loan protection insurers are also unlikely to leave you be throughout a period of unemployment through redundancy or illness. Some have back to work schemes designed to help you get back to work as quickly as possible. Sprained muscle injuries, usually relatively simple to treat, are the most common types of injury your insurer could offer advice and even a personal care adviser for.
If you are flat out of a job, self-help guides, telephone advice and guidance on seeking career changes and putting a CV together can also be offered.
Although the market can be confusing and even intimidating, this does not mean loan protection insurance should not be considered. It can be a viable way of protecting you from getting a bad credit rating and even bailiffs if you can't pay a credit card or bank loan back. A simple way of avoiding paying too much is to not take insurance offered by your loan provider and look around at independent providers. Plenty of free impartial advice is out there too, and ensuring you read and understand the small print will also help. Finally, these kinds of policy are part of the payment protection insurance market, still under examination from the Competition Commission after some firms were found to be mis-selling policies – so tread carefully, and shop around with standalone providers too.
