People have called loan protection many things, like a "rip-off." In 2006, the Financial Services Authority looked into the sale of payment protection insurance (PPI) products and found that they were often sold to people who didn't need them. This led to the negative comments. Many customers weren't told how much the total coverage would cost, weren't told about the exclusions that all policies have, and were being charged high premiums for coverage that wasn't enough or that they couldn't use.
When bought wrong, the cover can be a very expensive waste of money, especially if it is bought at the same time as the loan from the lender. But if you go with a specialist who works on their own, you can save hundreds of pounds.
Loan payment protection can give you a tax-free income starting between the 31st and 90th day of being out of work because of an accident, illness, or being laid off. This is true if you take out the protection with your situation in mind. Then, depending on the policy, it would keep making you feel safe for another 12 to 24 months. The terms and conditions are always listed in the key facts, along with the exclusions. The exclusions can be different, but there are some that are the same for all policies, like if you only work part time, are self-employed, have a medical condition that was there before, or are retired.
The biggest problem with the payment protection industry has been that people don't know much about the products when they buy a policy. Lenders don't tell people much, if anything, about how much the total amount of coverage will cost, what's not covered by a policy, or that they can shop around for coverage to find the cheapest premiums. Most loan insurance is sold at the same time as the loan, and these are the companies that were fined by the Financial Services Authority during the investigation. The problem with getting loan protection from a traditional bank is that they don't know much about the product or how to sell it. On the other hand, a specialist in payment protection knows the product inside and out and can share that knowledge with the customer.
At the time of buying the policy, the exclusions should be made clear and written in a way that is easy to understand, not in the technical language that is often used in policies. Most standalone specialists will give you access to the information you need because they don't put their huge profits ahead of what's best for the customer, like a high street lender does. Use the specialist's knowledge to your advantage so that you won't be let down when you need it most and instead have the security that loan protection should give you.
