Cheap loan insurance: is it worth taking?
- 2ND OCTOBER 2007
Loan insurance is one of a family of payment protection policies taken out to cover the possibility that you might come out of work if you were to suffer from an accident, sickness or unemployment. However faith in the product has dropped drastically after it was found there was wide spread mis-selling of policies. In some cases, cover had been sold to those who couldn’t hope to claim against them such as those who were part time workers or retired and, when bought alongside the loa,n the cover was expensive. An alternative is to shop around with standalone providers; in fact if you want cheap loan insurance then it is essential to go with a specialist.
Loan insurance, providing it is suitable for your circumstances, will typically start to payout between the 31st day and 90th day of being out of work, if you go with a specialist such as British Insurance then you will be paid from the 31st day and the cover would give you an income to ensure that you would be able to continue meeting your loan repayments. The policy would continue for up to 12 months and with some providers for up to 24 months which means that you don’t have to worry about getting into debt.
Simon Burgess from British Insurance is forever warning the consumer to be on guard when buying loan protection. “You have to be aware of the small print in policies that could mean you would be ineligible to claim. It is the lack of information which led to many consumers not understanding their policy and despite the fact that there has been an investigation into the sector and fines have been handed out by the Financial Services Authority, firms are still lacking. Now the Financial Services Authority are fining the Chief Executives themselves with personal fines after the latest round of investigations into the sector by way of mystery shoppers. I have no sympathy for them”.
He adds: “Cheap loan insurance can be worth taking as long as you realise there are exclusions, the most common are if you are retired, a part time worker or suffering from a pre-existing medical condition. Stick with the standalone providers, shop around for cover and take advice and read the small print before buying.”
