Loan cover: is it just a waste of money?
- 10TH OCTOBER 2007
With the Financial Services Authority recently highlighting the fact that some loan payment protection insurance cover has been mis-sold and is continuing to be mis-sold despite warnings that firms have to make the product clear, it can be a worry knowing whether you should purchase loan cover.
However, if you choose to buy loan cover independently and are given the facts surrounding a policy, it can still be an invaluable safety net on which to fall if you should become unemployed, suffer an accident or become sick.
If you buy your loan cover from the high street lender alongside your loan then it could very well turn out to be nothing more than a waste of money and a very expensive waste at that. The high street lender often gives very little information when it comes to the exclusions in a policy and it is imperative that you understand the exclusions if you want be sure that you would be able to claim on the policy. Typical exclusions are if you are a part time worker, or of retirement age, suffer from an illness at the time of taking out the cover or if you don’t have a full time job.
Simon Burgess from British Insurance, one of the most ethical specialist providers around, warns consumers to be aware of the small print in a policy: “… as this is what has caused the majority of problems with mis-selling of policies. Providing that you would be eligible to claim on a policy then it would give you the peace of mind and security that if you were to become unemployed; an accident or suffer from prolonged illness, you would still have the money needed to meet your loan repayments.”
Loan cover from British Insurance would give you an income which was tax free from the 31st day of being out of work; some providers ask that you are out of work for anything up to 90 days before they pay. The cover would continue for up to 12 months and with some providers extending this to 24 months but you have to check the small print and key facts of the policy for its suitability before you buy.
