Loan insurance was supposed to be made to give individual borrowers the peace of mind they need to know that their debt is covered in case they get sick or lose their job. In the last year or so, however, the Financial Services Authority has looked into the payment protection insurance industry and found that this is not true.
Instead of protecting the consumer, loan insurance was a cash cow for high street banks and lenders. The strict terms and conditions, which include several exclusions, helped them make a good profit. Because of these exclusions, many people couldn't make claims on their loan insurance when they needed to. This could have made their debts even worse and caused them to have trouble paying their bills, even though it wasn't their fault. So, in some cases, loan insurance was not a very good deal at all.
Some of the exclusions in the fine print of loan insurance should have been brought to people's attention by the salespeople who sold them the insurance, but it seems that making money was more important. This just shows that the general public needs to know more about loan insurance and what it can do for them.
It is the customer's responsibility to read the terms and conditions of the loan insurance they are considering to make sure they would be eligible for a payout if they needed to make a claim. This is a must for peace of mind and to keep away from people who would try to trick them for profits and results. Instead of being a number, consumers should take action and help themselves, since there aren't many organisations that will insure their loans for them.
