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Loan Payment Protection Insurance Covers Your Repayments

Jul 25, 2008
A loan payment protection insurance policy is taken out to ensure that if you find yourself without an income due to being made redundant or if you become sick or have an accident that means you are unable to work you would still be able to pay your repayments. These payments can include your loan or credit card outgoings up to so much of your payment each month.

When taking on a loan you are usually offered protection for it. However when adding it onto the cost of the policy, the lender could then add interest on top of it. This means that you are paying interest not only on the amount you want to borrow but also on the protection for the loan. In some cases this can also double the cost of what was once a cheap loan. You will also be paying part of the 4 billion each month that payment protection brings in for the high street lender in profits.

Standalone policies taken from an independent provider will offer the cheapest premiums for your protection. In some cases the amount you are able to save will be as much as 80%. You will also be presented with advice and information which will allow you to decide if loan payment protection is suitable for your circumstances and what the protection entails. Knowing as much about the product you are considering taking on is essential if you are to get the best deal.

Loan payment protection insurance should be considered essential as if you get behind on your loan repayments you will at the least earn yourself a bad mark on your credit rating. Your credit rating is what determines how big a risk you are when it comes to repaying. If you have a bad rating due to missed repayments then it is very unlikely that you will be given any type of credit in the future. In the worst case you could see yourself having to go to court and this could lead to you gaining a County Court Judgement. You could also see the judge sending bailiffs to your home to take your possessions to sell so that the lender can get back what you owe.

It is important to check the terms and conditions of any loan payment protection insurance policy that you are considering taking out as the terms of it will differ depending on the provider. Some providers would add in very few exclusions while others can add in many and these have to be checked against your circumstances if you are to be eligible to make a claim. You also have to check for how long you would have to wait before you would be able to claim and how long the policy would payout. Providers can ask you wait for 30 days before paying out but some can put a deferment period of around 90 days. Some providers will payout on the policy for a period of 12 months while others could offer 24 monthly repayments.
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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