Even though loan protection insurance has gotten some bad press, you should still think about whether getting a policy would be in your best interests. People have said bad things about the cover, but the real problem should be with the people who sell it even though they don't know much about it.
Most policies that are wrongly sold are bought along with loans when they are taken out, and high profits have been put ahead of what is best for the customer. This makes sense when you think about how high street lenders make more than GBP4 billion each year by selling payment protection insurance along with loans and mortgages. When you buy insurance with a loan, the premiums are often the highest. If you buy insurance on its own, you can save a lot of money and get the information you need to make an informed decision.
Most problems have been caused by the exclusions, or rather by the fact that people didn't know about them when they bought the policy. Most loan insurance policies have exclusions, such as not being covered if you only work part-time, have a pre-existing medical condition, are already retired, or only work part-time. There may be more that the provider lists, so it's important to compare both the quotes and the list of things that aren't covered. You can find the exclusions in the policy's fine print, and a specialist provider will always tell you about them before you buy the cover.
Depending on your situation, loan protection insurance can give you a tax-free income that you can use to pay your monthly loan payments and stay out of debt. If you lost your job because of an accident, illness, or other reason, like being laid off, you would still have to pay back your loan or credit card each month. Without a safety net, you could end up in debt or even worse.
Coverage could start paying out between the 31st and 90th day of not working, and it could last between 12 and 24 months, depending on the provider. This means you wouldn't have to worry about where to get the money every month and would be able to relax until you got back on your feet and back to work.
If you stick with an independent specialist provider, you can be sure that you will get all the information you need to know if a policy would work for you. Along with this, you will get quotes for the coverage that are as cheap as possible. These quotes will be based on your age when you buy the policy and how much you pay each month on your loan. Don't get loan protection insurance along with your loan, and make sure it isn't already included in the cost of the loan or credit card. Some lenders will give you a quote for a loan that includes loan protection insurance.
