Save tons by buying private payment protection insurance
MONEY MARKETING – MAY 2007 - 1ST MAY 2007
Why pay more for something if you don’t have to? Check out independent payment protection insurance firms.
For years loan borrowers were not given the choice as to whether they needed payment protection insurance. They were in many cases swindled into it as the operator on the other end of the phone said it was part of the package.
Things are changing for the better where the consumer is concerned. The payment protection insurance industry has come under fierce criticism for its high pressure sales tactics and excessive prices.
In fact in recent months the regulator has issued large fines against providers such as Capital One Bank (Europe) Plc and GE Capital Bank for failing to treat their customers fairly when selling payment protection insurance. The situation has got so bad that the market is now under review by the Competition Commission.
But the actual product itself should not be cast aside. The protection it can provide certain consumers makes very good sense.
One of the most unfortunate aspects of all the bad press over the less than sparkling reputation of payment protection insurance sellers is that overstretched borrowers who really need payment protection insurance are now put off from taking out the cover, when all that’s required is a few simple precautions.
The most important safeguard is to check the terms and conditions of the cover before buying.
Some of the more comprehensive policies will meet the monthly loan repayments in the event of illness, accident or unemployment and will include life cover to clear the loan if the borrower dies.
Samantha Owens, an analyst at Moneyfacts, says that people should check that hey are going to get the cover that they want and also how long they have to wait before they can make a claim as this can typically be anything form 30 to 60 days.
It is important for borrowers to remember that they don’t have to buy the payment protection insurance cover from their loan company.
An independent provider like www.paymentcare.co.uk or www.britishinsurance.com may offer you a much better deal.
These companies quote payment protection insurance according to the size of the monthly payment to be protected. This means that if needed, one policy can be used to cover multiple loans.
Andrew Hagger, Head of News and Press at Moneyfacts, says that an independent provider can offer substantial savings and the cover is more flexible than the typical single premium policies charged by the banks.
“The banks will add the insurance premium to the loan and charge interest on it, which means that those with poor credit histories will end up paying more,” he says.
“The other downside with these single premium policies is that they are heavily front loaded so that if a borrower repays their loan early they will not receive the pro rata return of the payment protection insurance premiums.”
Someone borrowing £5,000 over three years form Northern Rock would have a fixed monthly repayment of £169.51 including £16.86 in respect of the company’s payment protection insurance cover. This means that over the life of the loan the insurance would cost £606.96.
At Paymentcare.co.uk the equivalent monthly payment protection insurance premium would be £8.53 making a total saving of almost £300.
The next time you do an overhaul of your monthly outgoings, find out how much you are paying in payment protection insurance. It is more than likely that you are paying more than you have to.
Give one of the independent payment protection insurance providers a call to see if you could be better off with one of their packages. But compare their conditions with those of your current payment protection insurance provider before signing on
