Loan payment protection insurance can help you keep making your monthly loan payments if you lose your job because of an accident, long-term illness, or being made redundant against your will. Even though it can be a safety net, coverage isn't right for every situation, and if you want it to do what it's meant to do, you need to know what it is and what it doesn't cover.
The exclusions in loan payment protection insurance are what can stop you from making a claim and tell you if the coverage is right for your situation. Some of the most common reasons you can't get it are if you only work part-time, are retired, or have been sick in the last 2 years and can't work because of it. Loan payment protection insurance policies can be different from one provider to the next, so you do need to check the important details and fine print.
Once you've decided that loan payment protection insurance is right for you, it will start to pay you a tax-free income after you've been out of work for a certain amount of time, which can be anywhere from 31 days to 90 days and is set when you buy the policy. Once the coverage starts, it will keep giving you money for up to 12 months, and with some companies, for up to 24 months.
Loan payment protection insurance has its problems, which were brought to light in 2005 when the Citizens Advice made a great complaint to the Office of Fair Trading and the Financial Services Authority looked into it. As a result, several high street lenders were fined for mis-selling policies. The FSA is still keeping an eye on the sector even though it is now in the hands of the Competition Commission. The Competition Commission is looking into the sector in depth, and their investigation should be done by February 2009. After the most recent round of investigations, it was found that payment protection is still hard to understand for consumers because high street providers and banks don't always make it clear when selling it. This led to personal fines being given to Chief Executives of companies.
For now, stick with independent providers for loan payment protection insurance to make sure you get the best advice and information and the lowest premiums.
