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Loan Payment Protection, Is it Worth the Added Payout?

Jun 28, 2008
Providing you have looked into what loan payment protection can and cannot do then it can be a very worthwhile addition to what you already payout each month. Problems only arise when cover is taken on without knowing anything about it and if you have not checked for suitability for your circumstances. A policy does not have to cost a fortune each month if you shop around for the lowest premiums. However many individuals fail to realise that they do have the option of shopping around for a policy.

Many who were mis-sold cover were done so after having it added onto the borrowing at the time of taking the loan. Along with being mis-sold a policy because they were not given the information needed to be able to decide if it was suitable, they also paid over the odds and contributed to the 4 billion in profits that high street lenders make from payment insurance each year.

Loan payment protection premiums taken with an independent provider are based on the amount you wish to protect and your age. The amount of course is what you have to payout each month in loans or credit card outgoings. This will be the tax-free income that you get back if you should become unemployed or suffer from an illness or accident that means you cannot work.

All providers state that you have to stand to the first so many days before you are able to put in a claim on the policy. Some will ask that you wait for 30 days while others might ask that you do not claim before the 90th day. Once you have begun to claim you will then get a payment each to carry on meeting your outgoings for a certain length of time. Some providers policies will pay for 12 months and others will pay for 24 months so always check the terms and conditions. You also have to check the conditions to be sure that cover is right for your circumstances.

Keeping up with your loan repayments is essential, at the very least if you are not able to maintain them then you will gain a bad mark against your credit file. As all lenders take a look at your credit file first before allowing you credit, you could struggle to get approved for a loan. Even if you manage to get approval you could perhaps have to pay a high rate of interest. In the worst situation the lender could take you to court and you could gain a County Court Judgement against you. You might also have bailiffs coming to your home to take your possessions.

Loan payment protection can ease all of these worries by providing you with the money needed to be able to continue meeting your outgoings and so avoid adding stress onto the situation. A policy would allow you to search around for work if you are unemployed. You would be able to concentrate on attending interviews or in the case of being unable to work due to incapacity it would allow you to make a full recovery with peace of mind.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan payment protection.
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