If you have loan outgoings to keep up with each month you could struggle to continue paying them if you lost your income. You could of course rely on savings, however if you were to be unemployed or incapacitated for any length of time those savings could run out. You could also apply for State benefit, but you have to be eligible to claim and even then the income you got might not be enough to pay your loan repayments. Loan insurance however can be taken for a small premium that is payable each month and this would allow you to cover your repayments and receive this income.
Policies begin to payout for a certain amount of time after you have become incapacitated or unemployed. The majority of providers will offer cover that continues for a period of 12 months, however some providers might offer a policy that would continue for up to 24 months. Some ask that you wait for up to 30 days and others ask a period of 90 days of waiting to put in your claim. During this time you would not have to worry about where you would find the money to continue meeting your commitments. You would have the money in the bank to fall back on which means you are able to concentrate on finding a suitable job that pays the salary you are accustomed to getting. If you are unfit for work it would then allow you to concentrate on making a recovery.
Loan insurance has suffered from a bad history due to the fact that the Financial Services Authority highlighted mis-selling in 2005. It was found that cover had been sold to individuals that could not possibly hope to claim on their policy. This included those who were retired or who only worked part time. Often there had been no or little information given at the time of selling the cover and essential information about what the cover can and cannot do was not mentioned. All payment protection comes with exclusions and it is essential that these are checked against your circumstances if you are to be sure that a policy is suitable. You also have to compare the small print of the policy as some providers will add in more exclusions that others.
While some changes for the better have been seen in the selling of loan insurance there is still more needs to be done. High street lenders still have a stranglehold over the sector and many consumers are still not aware that they can choose to shop around and compare protection. The high street lenders will not make the consumer aware of their options for taking a policy because by adding in protection alongside their loan they bring in £4 billion each year in profits. Never be conned into believing that the borrowing depends on you covering it with the protection offered, you always have a choice of whether you wish to protect it or not and to choose to buy your policy independently of the loan.
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