Loan Cover from British Insurance
Loan cover can be a financial lifeline should you lose your income due to involuntary unemployment, accident or prolonged illness. This invaluable payment protection insurance (PPI) product offers relatively short-term assistance to people who have lost their income due to one of the events described through the form of a tax free monthly payment assistance. Benefits are paid either over a 12 or 24 period to covered people who face involuntary redundancy, prolonged illness, or accident. Loan payment insurance is designed to assist by helping the displaced worker to cover his or her monthly debt obligations. It does not fully replaced lost job income, but it covers a significant portion and helps the insured meet their monthly debt obligations.
Loan cover is often sold in combination with loan products by banks and High Street lenders. Consumers are fast becoming aware of the advantages of acquiring protection on the open market, through independent insurance providers. Along with helping people meet their monthly debt obligations, some plans also have provisions that offer a small income supplement for use in covering monthly expenses.
Loan cover is one of three common forms of insurance that fall under a portfolio of products known as payment protection insurance. The other two types are mortgage payment insurance and income payment protection. The benefits and basic aspects of each protection are similar. There are some light distinctions among them in terms of protection purposes and features.
Mortgage payment insurance, similar to loan cover, is also often sold in combination with mortgage products by banks and lenders. Again, independent broker advantages are being recognised more in the marketplace. Packaging of loan and insurance products by banks and High Street lenders has actually become scrutinised because of some common mis-selling practices. Mortgage payment protection is also similar to loan cover in function, but its purpose is a bit different. The mortgage payment insurance is designed to help address monthly mortgage demands for those who have lost their income. Many unprotected people have sadly lost their homes because they had no way to meet mortgage payments during periods of unemployment or inability to work.
The third payment protection is income payment cover. This is fairly easy to understand in principle. Its intent is to protect the insured person by offsetting lost income. While the payments do not equal the entire income that has been lost, they do cover a significant portion. For many Brits, this short-term support is vital to help meet monthly debt and expense requirements.
There is some confusion associated with income payment protection insurance, but it stems largely from semantics. Income payment protection insurance cover is often confused with income protetcion because their names and terms are often used synonymously. The products themselves are quite different in nature. Income payment cover, as part of the payment insurance portfolio is a short-term cover. Income protection is a higher premium, longer-term protection that pays benefits for incapacity up to retirement in some instances.
As mentioned, packaging of loan payment insurance and mortgage payment insurance with loan products has been common for banks and lenders. This practice itself is okay, but the high pressure selling tactics and deception often used is not related to fair competition. Some lenders have pressured borrowers into believe they needed to buy insurance protection to get the loan they desire. Others have packaged premium costs with loan repayment costs to hide how expensive their payment cover is. Often, the only mention of the premium expense comes in the fine print of disclosure documents. Borrowers are often unaware they are event protected because the premiums are spread over time and have a modest effect on the monthly payments.
Some sellers have even engaged in selling payment insurance to retired people, part time employees and people with preexisting medical conditions. Unfortunately, all these groups are ineligible to receive the payout benefits offered by the plans. Insured people must be employed full time to be eligible for benefits of the insurance.
The Citizen’s Advice, a leading consumer advocate group, led the charge to shed light on these mis-selling techniques by filing a super complaint with the Office of Fair Trading (OFT) in 2005. As a result, the OFT and the Financial Services Authority (FSA) have conducted investigations. The FSA fined and sanctioned several banks and lenders it felt had used unfair selling practices. This has helped reduce some of the use of the practices. The OFT appointed the Competition Commission to further investigate and it is awaiting for the results before taking further action. Their findings should be revealed in early 2009.
The greatest consumer benefits that resulted from the negative publicity are better knowledge of the products themselves and the availability of products from independent insurance providers. Independent providers specialise in insurance and can usually offer rates that are 40 to 80 per cent cheaper than those offered by banks and High Street lenders. This has helped make payment protection a much better value proposition for Brits.
Along with having better rates, independent standalone providers are also more notorious for good customer service and ethical business practices. Most Independent providers are members of insurance industry associations which maintain strict rules and codes of conduct for members. This self-regulated nature of the independent provider motivates them to work hard to get the best products and rates for virtually any customer. The expansion of the internet has helped make Independent providers more convenient to consumers as well. People can efficiently visit a specialist web site, share some basic information, and receive selected product and rate offers.
Consumers need to provide for themselves and their families during temporary displacement. The State offers very little support for unemployment. They have, on the whole, decided that the responsibility for such provision be left up to individuals, offering very little financial assistance to those who need it most. Fortunately, because of the competitive broker environment, great value can be found from loan cover, mortgage payment insurance, and income payment protection.
Involuntary redundancy and health issues can be stressful enough to manage without adding the financial burden that comes with lost income. Fortunately, access to low cost premiums has helped more consumers provide financial security for themselves and their families via loan cover. This is vital to protecting people that must rely on monthly income to sustain them and meet financial obligations.
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