Loan insurance is taken out for a fixed premium each month and would provide you with the income you insured against so that you could continue meeting your loan repayments. The amount you insure against would be what you payout each month for loan repayments, up to a certain amount defined by the provider. Policies cover against unemployment by such as redundancy or if you are unable to work after being involved in an accident or if you should become sick.
The cost of a policy can vary depending on whether you take it with the high street lender or take it with a specialist in payment protection. Even with standalone payment protection specialists you have to compare as the premiums vary considerably. The cheapest premiums could save you up to as much as 80% when compared with the cost of insurance with the high street lender.
Choosing to take out loan insurance from a standalone provider has many other benefits than just saving you on the cost of the premiums. You would have access to the vital information and the key facts which are needed for you to be able to decide if cover is suitable. All loan payment protection will have exclusions in the policy which you need to know about and check. These vary and some providers would add in more than others. Once you had made sure that a policy is suitable you would then be able to relax and concentrate on making a recovery or take the time needed to find work again.
Covering your loan and credit card repayments should be given some thought as getting into debt through failing behind on them has serious consequences. Your credit rating is the first thing that would be affected by missed loan repayments. Your credit file is also what is taken into account by all lenders when you apply for a loan and if yours has a bad mark against it for a missed repayment then you will stand very little chance of getting approval for credit. Depending on what you owe out and how much, the lender could decide to take you to court. This could mean you would have a County Court Judgment against you. All of this could be avoided by paying out an affordable premium each month.
You would have to wait for a certain length of time before putting in your claim on loan insurance; this is usually between the 30th and 90th day of unemployment or of incapacity. You need to check before taking on the cover to see if the policy would be backdated to the first day of you being unable to work or of becoming incapacitated as some providers will do this. Upon commencement of the policy you would then benefit from an income tax-free for between 12 months and 24 months. After this period of time the policy would stop providing your income but usually you would have found work again or have had plenty of time to make a recovery from illness.
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