While you should certainly consider taking out loan payment protection insurance, because it can be a valuable asset, be careful to avoid taking out a policy with the same company that provides your loan. Sometimes high street lenders add on the protection policy without asking the individual if they want or need the cover. Taking a policy this way not only adds enormous expense to the cost of the loan, but can result in you wasting money on a useless policy that would not pay out should you claim.
High street lenders are known to charge premiums that can almost double the cost of a cheap loan. As well as adding the total cost of a policy onto the amount you are borrowing, they then top it off and add interest onto the total amount. Those lenders who try to persuade the borrower that the loan relies on taking out loan payment insurance protection are not being truthful. Some might ask that you do protect the amount you are borrowing, but you do not have to take the payment insurance with the loan provider. You can choose to shop around with a specialist provider and compare cheaper quotes.
An independent provider could save you up to 80% in comparison with a high street lender. At the same time a standalone provider can offer all the advice you need to make sure you know the product is suitable for your circumstances. For example, you have to watch out for exclusions such as being of retirement age, suffering from an ongoing illness, only being in part-time work or being self-employed. These are common exclusions but there are exceptions. For instance, those who are self-employed could still be eligible to take out a policy if they have to cease trading through no fault of their own. And if you have a pre-existing medical condition but it has not resurfaced within the last two years then a policy could be suitable.
Loan protection cover would begin to provide the policy holder with a tax-free income once they have been out of work for a defined period of time. The exact time period depends on the provider but is usually between day 30 to 90 of being continually unable to work. You would then have peace of mind for between 12 to 24 months, as indicated in the key facts of the cover.
You also have to be very wary when taking out a loan online. Loan payment protection insurance can also be added in this way. A recent survey by a popular watchdog revealed that out of 41 quotes for loans, 24 of these had included the insurance. The majority of them also gave separate quotes for both with and without insurance. When applying for your quote online very often you have to un-tick a box yourself or click to a different place if you do not want insurance along with the loan, which is often confusing. However, some lenders have now agreed to change the pre-ticked box method. Always make sure you read the FAQs page when applying for a loan online so that you know whether protection is being included in the cost of the loan.
About the Author:
Simon Burgess is Managing Director of the award-winning British Insurance (http://www.britishinsurance.com), a specialist provider of low cost income payment protection insurance (PPI), mortgage payment protection insurance (MPPI) and loan payment protection insurance.
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