Loan Protection Explained

A loan protection policy is often a necessary product for today’s consumers. Many of us have loans which were used for many different purposes. Some are secured while others are unsecured, whichever option it is, one thing is for certain, the monthly instalments must be paid and you need to have a salary in order to do that. The lender won’t be too concerned if you were ill and out of work.

As the name implies loan protection is used to safeguard you against missed payments on your loan. It works by ensuring you have a replacement income if your main income was to disappear and this will allow you to meet your monthly commitments.

Loan Protection from Burgesses

Based on the provider you choose, there may be slightly different features but on the whole, loan protection policies have the following features:

• Benefits are paid for between 12 and 24 months. The product is not designed to provide long term benefits, however the period is usually adequate for individuals to get back into work.
• The policy will cover you if you were to lose your job because of an incident which is out of your control. The three types of involuntary acts catered for are accident, sickness or redundancy.
• Claims can be made after you’ve been out of work for a minimum of 30 continuous days. With some providers, the minimum time could be 90 days, so be sure to find out what your provider is offering.
• There is sometimes a waiting period of six months before you can make a claim. Providers set this in place to prevent people from applying for policies due to knowledge of impending redundancy.
• The policy does not pay 100 percent of your salary. There are maximum benefit levels but you should check with your provider for further details.

While you have a salaried income, losing your job or falling ill is probably the last thing on your mind, so by extension, you won’t really be thinking about loan protection. With such uncertainty in life, this is something you should think about.

What if you have a secured loan and your home is used as the collateral, if you fell ill and were unable to work, not only will you have to worry about getting better, but your recovery could be retarded by thoughts of losing your home. This is the last thing you need while on your sick bed.

Loan Protection

The following list is not exhaustive; these are just some of the major benefits you can receive:

• First and foremost is the peace of mind that comes with this policy. While you are well and fully employed, you will know that if the unexpected happened, you will be able to pay your loan payments and keep your life on track.
• You’ll be able to maintain a clean credit profile because there will be no missed payments, no defaults or county court judgements (CCJs) to be registered against you.
• If you have a loan secured against your property, then you won’t have to worry about losing your home if you were to fall behind on your payments.
• The benefits paid from the protection insurance are 100 percent tax free so you’ll be able to use every penny as you wish.

With benefits like these, you can see how necessary it is to protect your income. You can’t really rely on the state for handouts as the resources are becoming more and more limited due to over demand. Plus who knows if you will qualify for benefits anyway. The most worrying thing though is the fact that if you were to qualify, would the payments be enough to meet your monthly commitments?

All this seems to be a lot of guess work. You can remove all the doubt by simply purchasing your own protection, at least then you’ll know exactly what you are getting.

When deciding on your product and provider, you should take all the guess work out of the equation. It is important to know exactly what you are purchasing, how the claims are made and how the terms and conditions affect you.

Your loan provider will try to sell you their protection product along side your loan, but these are often more expensive and could increase the price of your loan payments considerably.

By choosing an independent provider, you will be pleasantly surprised by how much you can save on your premiums and how much cover you can receive for the price.

If you have heard talk about mis-selling within in loan insurance field, it might be of concern, however the Financial Services Authority (FSA) regulates the market. Following investigations with the Office of Fair Trading (OFT), several well known providers were fined for mis-selling products, so providers are now more vigilant when dealing with customers.

The problem was not with the products. The problems stemmed from providers who were not giving enough information to the customers to enable them to make informed decisions.

So to avoid being mis-sold, be sure to ask as many questions as you need to and be sure to read all the terms and conditions of your agreement. Find out about your circumstances specifically and ask the provider to expand on any exclusion that exists.

Also choose a provider with a long history of success and one that is regulated by the industry watchdog. Look for evidence of industry awards etc. All these will help build the reputation of the provider.

So based on the benefits listed above, you can see how important it is to protect your income. While you do not want to lose your job or become ill, it is much better to be prepared than to be left in a financial mess.

Having loan protection will give you the peace of mind you need. So why not see what the independent providers have to offer and apply for your protection product today.