A loan insurance plan can still be a safety net
- 5TH NOVEMBER 2007
A loan insurance plan can give you a replacement income if you should come out of work if you should have an accident, become sick or if you were to be made unemployed through no fault of your own. When taken out correctly the product can give you a tax free income each month so that you can continue meeting your loan or credit card repayments without worry.
Policies would begin to payout after you have been out of work for a set period of time which can be anything between the 31st and 90th day of being out of work continually depending on the particular provider. Cover would then continue for up to 12 or 24 months and this ensures that you do not have to worry about your repayments whilst you get better. While it can be a great lifeline there is a downside to a loan insurance plan and this is that it is not suitable for all circumstances because there are exclusions within all policies that could mean you would be ineligible to make a claim.
Exclusions which can be found in most loan payment protection insurance policies include if you are in part time work, if you are self-employed, suffer from a pre-existing medical condition or if you are of retirement age. Of course there can be others defined by the provider and it is essential that you check out the small print of any policy you are considering taking out.
Although a loan insurance plan can be taken out alongside the loan with the high street lender this is the worst possible way to buy the cover, the high street lender is notorious for charging high premiums for the cover and giving very little information to the consumer regarding the product. It is the lack of information which caused the majority of problems with mis-selling; consumers who are not aware of the exclusions cannot make an informed decision regarding the products suitability and so bought cover they could not possibly hope to claim against.
A far better way to take out the cover and get protection is to go with a standalone specialist provider such as British Insurance. British Insurance only sells payment protection products of which a loan insurance plan is just one, they can save the consumer up to 80% on loan payment protection while at the same time ensuring that the consumer gets the essential advice needed to determine if a loan insurance plan is suited to their circumstances.
Mis-selling was highlighted in 2005 when following a super complaint to the Office of Fair Trading (OFT), an investigation by the Financial Services Authority began which led to several well known names on the high street receiving fines. They continue to watch over the sector while the OFT has referred it to the Competition Commission who is currently conducting an in-depth inquiry which is set to reach conclusion in February 2009. While there have been changes made for the better already, the Financial Services Authority have revealed that in 2007 they will have still investigated over 4,000 cases of mis-selling even after stating changes that need to be made when selling the cover.
Clearly much more needs to be done in the sector and consumers have to be on their toes when it comes to buying the cover if they want the product to work the way it is designed to work, stick with an ethical specialist such as British Insurance when it comes to taking out a loan insurance plan if you want the safety net a policy can give.
