Why Take Out Loan Insurance?

When you apply for a store card, personal loan or new credit card, you will almost certainly have had this experience. Your attention is drawn to a little box on the form labelled insurance” often with the words strongly recommended” beside it.

What is loan insurance? The idea is to cover you if you find yourself unable to meet the repayments usually because of losing your employment, temporarily or permanently. The policy should make the repayments for a specified period usually 12 months. Loan insurance is often called PPI (payment protection insurance) though strictly speaking they are different. Loan insurance comes from the provider of a specific loan and covers only that loan, whereas PPI can be obtained separately and covers any loan.

How much does loan insurance cost? That partly depends what is covered. There are various things you can cover for:

critical/terminal illness;

A good loan insurance policy will give you the choice of how many of these you wish to be covered for. The more of them you are covered for, the higher the premium will be. There is often a 30 or 60 day wait from when the problem starts till when the policy starts paying out, but you should be able to opt for a backdate” to Day 1.

The cost of premiums is usually quoted as so much per 100 of the amount of the loan. Depending on how much cover you have, most loan insurance policies cost about 10-30 per 100 of the loan. As you can see, for a large loan this will be pretty expensive.

Can you cancel a loan insurance policy? Many people ask this question if they feel they have been pushed into taking out loan insurance they don’t really need. The answer is: in theory it should be possible to cancel a policy linked to a specific loan, and still keep the loan. In practice, however, the lenders can make it difficult for you as it isn’t in their interests for you to cancel. For example, they may say that you have to cancel the whole loan and take out a new one and they will probably give you less favourable terms on the second one!

The important thing is, be on your guard when taking out any new loan or credit agreement. Decide in advance what you need, and don’t let yourself be pressured into signing up for anything you don’t really want.

How Do You Use Personal Loan Insurance?

There are many factors, which you have no control over, that can cause you to be unable to make payments on a loan that you are responsible for.

You never know when you could be involved in an accident or suddenly become ill and have to leave your workplace for a period of time. Your employer may have to make some unavoidable cut-backs in the amount of wages being paid and the number of employees on the payroll or perhaps you own your own business and the income from it may not be as good as it was at first and you can no longer pay any additional payments.

When our interest rates or personal expenses have risen it is extremely hard to keep up on our loan payments.

Most of us worry about the possibility of not being able to pay back our loans especially if we have borrowed heavily and are close to our own capacity of repayment.The people who have young children and those who are about to retire or are well past retirement age, may be losing sleep because they are worrying about such issues.

It is for these reasons that insurers offer loan insurance, which is an insurance policy that protects against the possibility that someone will not be able to make their repayments.If you take on credit and you are offered insurance on the loan, you will not be denied the credit just because you do not take out the insurance.Don’t accept the first insurance quote you receive because the rates can vary greatly from insurer to insurer, so when you decide to use the loan insurance, shop around for the best quotes.

It can be a little easier to rest when you retire at night knowing that even if something unexpected happens, if you have loan insurance you do not have to worry about things you can’t control.

The uncontrolled events which loan insurance may cover are accidents, illness, and loss of employment or cutbacks in wages paid.You must be aware of the conditions and exclusions included in the policy agreements before you agree to any type of personal loan insurance; many people pay for loan insurance without much prospect of ever benefiting from it and sometimes without even knowing whether or not they have it.

There are some people who agree to loan insurance coverage without actually knowing they are receiving it, because lenders are anxious to add it to your account as a way of increasing their own revenues.

Some of these insurance policies may require that you accept the first job you are offered after losing your present one, however this can be very impractical for you if you have had a good paying job and now are forced to take one with a lower pay scale.

If you were to be allowed to search for a better paying job, it is entirely possible that you will be able to find a new job that is a more suitable match for your work experience and pay level.

It is very wise to have direct knowledge about the insurance you are paying for, and if it is not something you want, do not buy it.If you see that insurance coverage has been added to your loan account and you did not authorize it, call and see that is cancelled without hesitation.If someone wants to pay for something that may prove to be useful to them that is one thing, but it is another thing to have to pay for something you did not want or need.

Loan Payment Protection On Unsecured Loans?

Loan payment protection is an interesting tool that can protect your from many problems. This protection is compulsory on most secured loans, so, many people ignore the fact that on unsecured loans it is possible to obtain it and be assured that if any unfortunate event happens they’ll be protected and the loan will continue to be repaid till they recover from the situation that prevents them from repaying the loan themselves.

In order to understand what loan payment protection can do for you and why it is advisory to request it when applying for a loan, even if you fully understand the nature of this type of insurance, you also need to understand in which situations the protections triggers and what does it cover for. That way you’ll fully comprehend the benefits that this kind of protection provides to borrowers.

Purpose Of Loan Payment Protection

The purpose of this tool is to provide peace of mind and to protect you if for some unexpected circumstances your financial situation changes and you can no longer afford the monthly payments on your loan. The coverage will pay for the loan’s monthly installments if due to an accident, sickness or unemployment your income decreases significantly.

With this protection you can focus on finding a new job if you are unemployed or getting better if you’ve gone through an accident or illness. In the meantime this insurance will repay your loan till you can retake payment once again. Also, you won’t have to resort to your savings in order to meet the payments on your loan and your credit score and history won’t suffer either.

What Does Loan Payment Protection Do?

This particular insurance product will protect you from lack of income by repaying your loan for up to five years if you become ill, have an accident or are unemployed (generally, the term is shorter in this case). Thus, not only you’ll avoid becoming delinquent on an auto loan with the consequently non-alteration of your credit score or history, but you’ll also get to keep your car and avoid repossession.

Usually by the next month you become ill or are left redundant, the insurance will start repaying the loan till you recuperate. Of course, as in any other insurance product you’ll need to fill a claim in order to get this benefit working. But the whole process till the repayment starts won’t take more than 30 days. In the event of you dying, the insurance will repay the loan in full so your relatives or inheritors will be able to keep the vehicle without having to cancel the loan.

How About Elderly Citizens And Self-Employed?

The loan payment protection is available to almost anyone between the ages of 18 and 65 just like with most insurances. The insurance may extend further than 65 but only if it has been taken before that age. As regards those who are self-employed, there is no obstacle for them to obtain this insurance. Yet, they’ll need to meet the same requirements needed to qualify for the actual car loan (proof of income, tax presentations, etc.) apart from the requirements for insurance approval.

Ensure Loan Insurance Is Suitable For Your Circumstances

Loan insurance can give you an income if you should become unable to work due to suffering an illness, accident or unemployment. Loan insurance can give tax-free payments that allow you to continue meeting your debt repayments without worry. This allows you to concentrate on getting better and getting back to work, or finding another job, with the security of knowing you do not have to struggle to afford your loan repayments each month.

Loan payment protection can start to pay out once you have been unable to work for between 30 to 90 days. Once your policy has started providing you with the security of an income it then continues to do so for between one to two years. While this is usually enough time to get back to work, those who remain unable to work would have to consider how they would continue repaying their loan or credit card debt once the policy had stopped providing.

Loan protection has been branded as nothing but a rip-off after the Office of Fair Trading revealed that mis-selling was widespread in 2005. But the majority of mis-selling occurs among the high street lenders that sell loan protection alongside a loan at the time of borrowing. Often very little information is given out to those buying cover, which means they cannot decide if they are eligible to claim. In fact, there are exclusions in the cover which mean it would be impossible for some people to claim. Those individuals who are self-employed, retired, suffering from a pre-existing medical condition or who do not work full time would have to check the terms and conditions very carefully. Those with an illness could only claim if they had not had a re-occurrence of the illness within two years prior to taking out a policy.

One of the biggest problems associated with the loan cover is the selling of policies by those who have little or no experience in payment protection. The protection can be a very valuable asset to have, but the policy holder must be sure that they would be eligible for a payout. An independent provider of payment protection will offer advice and information before you take on the cover and this is the safest way to buy. Along with this, going to a standalone provider is also the cheapest possible way of taking out a policy.

Quotes for the products vary considerably depending on where you choose to look. Loan insurance taken from a specialist can save you as much as 80% in comparison to the quotes high street lenders provide. One way that the high street lenders rip-off the consumer is by working out how much payment protection would cost and then adding it onto the cost of the loan before calculating the interest. It is though that this practice adds 4 billion to high street lenders’ profits each year. An ethical standalone specialist, on the other hand, will give you a quote based on the amount of your loan repayments each month and your age.

Guide To Payment Protection Insurance

When you take out a loan, whether it be a personal loan or secured loan, you will be repaying it over a fixed term which can range from a couple of months to several years. But what happens if you cannot afford to repay part of your loan one month? Well what will happen will depend on the agreement you signed with your lender. Sometimes you will be able to simply pay it off at a later date, or you may find your regular payments go up to cover your missed payment.

But what if something unexpected happens, like you lose your job or fall ill, and are unable to pay off your loan? Again, what will happen will depend on your loan agreement but many loan providers will offer you Payment Protection Insurance (PPI) when you take out your loan to cover you in such posibilities. Although this may seem like an attractive prospect you should remember that this is an additional cost on top of your loan, and you should consider whether or not you really require this cover.

What is Payment Protection Insurance?

Payment Protection Insurance is offered by lenders to borrowers when they take out a loan. It covers their personal or secured loan and avoids the borrower getting into debt if they an accident, are sick or become unemployed. It will usually be offered by the lender at the time of the borrower taking out the loan, but is is also available to be taken at a later date or from another broker.

The cost of Payment Protection Insurance will vary depending on which lender is offering it. It will also depend on the personal circumstances of the borrower, along with the amount that is being borrowed and for how long the repayments are for.

The Downside of Payment Protection Insurance

Although Payment Protection Insurance may seem an attractive prospect to stop you falling behind with your loan repayments in the event of unforeseen circumstances, there are a number of factors you should consider before entering into any agreements for it.

Firstly, Payment Protection Insurance can be very expensive, and can even double the actual cost of the loan. Secondly, you may not be eligible for payments for a period of up to six months after starting the policy. Thirdly, some only cover redundancy so are not suitable for the self-employed. Finally, sometimes the cost of PPI is added to the loan itself and you can end up paying interest on both the loan and PPI combined, as opposed to paying for two seperate products.

The Mis-Selling of Payment Protection Insurance

There have been frequent criticisms raised at companies offering Payment Protection Insurance that they mis-sell it. Many do not explain to customers that it is an option and instead talk the customer into thinking that it is part of the loan itself. Others do not explain that it can be taken out at a later date and with another company, which can often prove a lot cheaper. Also PPI is often sold by sales assistants who have no financial background so should not really be offering the product. This is sometimes the case with storecards which are offered by shop assistants. There have also been criticisms that Payment Protection Insurance policies include too many exclusions and only pay out under restrictive circumstances.

Loan Insurance: What Are The Options?

You have probably had the experience of applying for credit for a new car or household appliance, and finding yourself the object of a hard sell to take out loan insurance on top. Or even worse, finding AFTER signing the agreement that loan insurance has been included without a by-your-leave.

Mis-selling of loan insurance is becoming increasingly recognised as a problem. But obviously, there are circumstances where it makes sense to insure yourself against being unable to pay. After all, nobody wants the bailiffs removing their belongings while the neighbours look on.

If you decide you need some form of loan insurance, there are alternatives to taking the policy offered by the lender.

Shop around for a stand-alone policy from an independent provider. These policies are sometimes called income protection” policies or ASU (accident, sickness or unemployment)” policies. They pay out an income that covers your debt replacement requirements usually for a year, or in some cases two years. Some providers offer a cheaper policy that pays for three or six months. You can choose whether to cover for just accident/sickness, just unemployment, or all three. These policies only allow a single claim after this the policy is cancelled and you have to apply for a new one. As you can see these policies are much more flexible and allow you to set up cover that meets your individual needs.
Another option is PHI permanent health insurance. Confusingly, the name income protection policy” is also sometimes applied to this type of cover. This type of policy will pay out not just for a year or two years, but for as long as you are incapacitated up till age 65 or your selected retirement age. There is no limit on the number of claims you can make. Most of these policies only cover accident or sickness, though one or two providers have begun to offer policies that include one year of unemployment cover. Obviously these policies are more expensive. So it is a gamble as to whether you will need them, since conditions you anticipated or already knew about are excluded.

The range of loan insurance policies available can be very confusing, especially as different insurers give them different names. These policies are much better value than the ones you get from lenders, but there are still numerous restrictions and exclusions that vary from policy to policy. So you do need to check that you will be able to claim, especially if you have a pre-existing condition. The best thing is to take advice from an independent broker or provider. That way you can be certain of finding cover that meets your needs.

Loan Protection Insurance Is Still Worthwhile Considering Despite The Bad Publicity

Despite the bad publicity surrounding loan protection insurance it is still worthwhile considering whether a policy would be in your best interests. The cover has come under fire but it is not the actual product that should be the cause for concern but rather those who sell it with very little experience.

The majority of policies that are mis-sold are bought alongside loans at the time of taking out the borrowing and high profits have been put ahead of the consumers’ best interests. This is not surprising when you consider that high street lenders bring in profits of over 4 billion each year when selling payment protection insurance policies alongside loans and mortgages. Cover bought alongside loans often comes with the highest premiums and by choosing to take out the cover independently you can make huge savings on the cover along with getting the information needed to make an informed decision.

It is the exclusions which have caused the majority of problems – or rather the lack of knowledge about them at the time of being sold the policy. Exclusions which are common to the majority of loan insurance policies include being in part time employment, suffering a pre-existing medical condition, being of retirement age or working only part time. There can be others set out by the provider so it is essential that when you compare quotes for the cover you also compare the exclusions. The exclusions can be found in the small print of the policy and a specialist provider will always offer this information before you buy the cover.

Providing loan protection insurance is suitable for your circumstances then it can give you a tax free income with which to pay your monthly loan repayments and so keep out of debt. If you were to come out of work through suffering an accident, illness or through such as unemployment then you would still have to continue repaying your loan or credit card each month. Without a lifeline you could find yourself getting into debt or worse.

Cover could begin to payout from between the 31st and 90th day of being continually out of work and would then last for between 12 and 24 months depending on the provider. This means that you would not be struggling where to find the money each month and have peace of mind until you got back on your feet and back to work.

Sticking with an independent specialist provider you can be sure that you will get the information needed to be sure that a policy would be suitable for your needs. Along with this you will get the cheapest quotes possible for the cover which will be based on your age at the time of taking out the policy and the amount your loan repayments are each month. Always avoid taking out the cover alongside your loan and make sure that you check the cover has not been included in with the cost of the loan or credit card as some lenders will give you a quote for the loan with loan protection insurance already included.

Uk Loan Protection Insurance Can Be Found Cheaply

UK loan protection can be found cheaply but you have to go with a specialist in payment protection insurance (PPI) if you want the cheapest premiums along with the advice needed to ensure that a policy is suitable for your needs. Payment protection or ASU insurance as the product is also sold under is taken out if you want to ensure that you would have the money each month to continue meeting your loan repayments and not get into debt should you become unable to work due to redundancy, long term sickness or accident.

However UK loan protection hasn’t been without its faults which stem from an investigation in 2005 when the Office of Fair Trading received a super complaint from the Citizens Advice. The Financial Services Authority fined several high street names for wide spread mis-selling of the product due to sloppy sales practices and a lack of information given to many consumers at the point of sale.

Currently the whole protection insurance sector is in the hands of the Competition Commission who are conducting a review which is set to reach conclusion in February 2009. The mis-selling also ranged from not making the consumer aware of the exclusions which are in all policies, such as if you are self-employed, retired or only in part time work to charging way over the odds for the cover.

When bought correctly from a standalone specialist, UK loan protection insurance can give you a tax free income each and every month you are out of work for up to 12 months and with some policies, for up to 24 months. The cover would begin to provide you with a tax free income once you have been out of work for a set period of time which can be between one to three months’ of being out of work and can give great peace of mind and security until you get back on your feet.

While UK loan protection insurance can be taken out alongside the loan and indeed is usually offered at the time of taking out borrowing, historically this is the dearest option for taking what can be invaluable protection. The premiums for loan protection can be very expensive when taken with the loan and it can almost double the cost of the loan. If you want the cover then it is essential that you decline it from a high street lender and shop around for it independently. High street lenders rely on high premiums to make up for offering cheap loans however the specialist standalone provider on the other hand puts the consumers best interest ahead of huge profits and can save you hundreds of pounds while providing quality UK loan insurance that is a far superior product.

If you want the protection and security that UK loan protection insurance can give then stick with the standalone specialist provider to make sure you don’t fall prey to mis-selling of the cover. Mis-selling of payment protection has been wide spread and the majority of problems stemmed from a lack of information being given at the time of selling the product. All specialists will have the consumer’s best interest at heart and make the cover available for the cheapest premiums while giving you excellent free honest advice.

A Specialist Provider Offers Cheap Loan Insurance For Your Peace Of Mind

Faith in all payment protection products has decreased since the recent mis-selling scandal aroused the interest of the Office of Fair Trading and the Financial Services Authority. Following a super complaint by the Citizens Advice, investigations began into the sector which resulted in several firms receiving fines. Of the many problems that was highlighted was the fact that extortionate premiums were being charged. Many consumers were put off buying a policy, yet quality cheap loan insurance can be found if you choose to take it from a specialist provider.

The majority of those fined were given penalties for failing to give the consumer the information needed to determine if cover was suited to their circumstances. A lack of information meant individuals such as those who only work part time, are self-employed or retired were buying a policy only later then finding out that they were not eligible to claim.

While the above are just some of the exclusions which are usually found in the terms and conditions, there can be others. Providers can put in their own so it is crucial to read the wording from back to front. An ethical provider who specialises in selling payment protection and offers cheap loan insurance will always make sure that the consumer has access to the key facts of the cover.

When bought with your circumstances in mind cheap loan insurance can give you the money each month to continue servicing your loan repayments. Having this tax free payment would give you peace of mind and financially security of having something to fall back on. A policy can be taken out to protect against the possibility that you could become incapable of attending work if you were to have an accident, suffer from illness or unemployment.

Cheap loan insurance can be taken out for a premium each month which is based on how old you are when taking out the policy and the amount you wish to cover each month. With an independent provider the savings you can make are often as much as 80%.

Different providers have different terms and conditions regarding when cover would begin, usually it is between the 30th and 90th day of being unfit and lasts for 12 to 24 months. You can find the conditions of the policy you are interested in by reading the key facts. Some specialists will backdate protection to the first day you became unable to work which means you do not lose out.

By going with an independent provider you should get access to the wording and terms on their website. If you want to ensure that you have cheap loan insurance that you can rely on then buying cover from a specialist as opposed to taking it out alongside the loan at the time of borrowing is a must. In the past loan protection has been deemed to be confusing but an independent provider will make cover as transparent as possible. An ethical provider should always offer FAQs and make the quotation process easy to understand along with offering free advice.

Loan Insurance Can Work If Care Is Taken When Buying

By choosing to take out loan insurance independently you will usually get all the information needed to decide if would protect you in the way it was designed. While there has been a lot of bad publicity surrounding payment protection products it is not the actual cover that is at fault. It is the lack of understanding that a policy does not suit all which causes problems as well as the high premiums that many high street lenders charge.

Providing you realise there are exclusions in all loan insurance policies and have checked them against your circumstances you could have peace of mind. Some of the most recurrent exclusions which can be found include not working full time, being self-employed, suffering a pre-existing medical condition or being of retirement age. You do have to read the wording of the terms and conditions because providers can specify others.

The majority of loan insurance offered by specialist providers would begin to give you a tax free income from between the 31st and 90th day of being unable to work due to redundancy, illness or accident. Cover would give you a monthly lump sum which would mean that you are able to continue meeting your monthly loan or credit card repayments without a struggle. This income allows the policy holder to concentrate on getting better and back to work.

In the majority of cases protection will be offered by the high street lender at the time of borrowing. However, historically, cover taken this way has been known to be expensive. In some cases it has been reported to have boosted up the cost of the amount borrowed by almost half again. The cheapest way to get the protection you need is to go with an independent specialist provider. While some lenders do ask that you protect your loan repayments, it should not be dependent on you taking cover at the same time. You always have the option of choosing to take out the cover independently.

The high cost of loan insurance is just one of the many problems that the Financial Services Authority and Competition Commission are looking into. It is thought that high street lenders are currently bringing in around 4 billion in profits from the sale of cover alongside cheap loans. However they are remaining tight lipped, but the Competition Commission say they will use their powers to make the high street lender come clean.

There are many factors that have to be considered when buying cover. The premiums are a concern and of course while you want the cheapest you also need quality cover. The expensive cover offered by high street lenders is not particularly of better quality because it is more costly. In fact cover bought cheaper with an independent provider often has many additional benefits.

Loan insurance can give peace of mind and it can ease the worry of continuing to meet the commitments of your loan. Taking the free advice and reading the key facts supplied with a policy that the specialist offers goes a long way to helping you make an informed choice of ensuring that your loan repayments will still be met if disaster struck .