Loan payment protection insurance can be a great buy, and it can be a good safety net if you lose your job because of an accident, a long illness, or being laid off. The insurance can give you a monthly income that isn't taxed, so you can pay your bills without worrying while you get back to work. Usually, you are covered for up to 12 months, but some policies cover you for up to 24 months. This is usually more than enough time for you to get back on your feet.
But the policy is a good buy only if you buy it wisely and carefully. Loan protection has gotten a lot of bad press, which has hurt the industry. High street lenders are the worst offenders when it comes to selling overpriced and sometimes useless cover.
If you want to protect yourself with loan payment protection insurance, you should shop around and go to a stand-alone provider. A specialist who only works with payment protection will be able to give you the best advice about the policy and offer you the best rates. One of the most important things that came out of the Financial Services Authority's recent investigation of the sector was that people were being missold policies that they couldn't use if they lost their job. Most of the time, the policy was sold incorrectly because the customer didn't know about the policy's exceptions. When it comes to selling protection plans, high street lenders don't know much, which is why it's always safer to buy from an independent provider.
So, is it a good idea to buy loan payment protection? Yes, it can be, but only if you carefully look at what the policy has to offer and decide if it fits your needs.
