Archive for the ‘Loan Cover’

Loan cover – or loan payment protection insurance to give it its full name - is the broadest insurance product of the three common protections that make up the payment protection insurance portfolio. It is designed to be a way for people to cover their loan obligations in the event of job loss from accident, illness, or involuntary redundancy. Benefits are paid over 12 to 24 months through monthly tax free payments. For many people, loan cover is the best protection of credit rating and secured property during short-term unemployment stints triggered by a covered event.

The benefit eligibility usually begins 30 to 90 days after the first day of claim, depending on the provider. The maximum coverage offered by loan payment protection insurance providers will vary. But, ideally, the benefits would cover 100 per cent of monthly debt with a provision of up to 25 per cent of monthly income for expense needs.

Mortgage protection insurance (MPPI) is another of the common payment cover types. It is very similar with its core covers and benefits to loan protection. Its purpose is to help protect the insured’s home by providing payment for monthly mortgage obligations. As with loan cover, mortgage payment insurance is regularly sold alongside mortgage products by banks and lenders.

The packaging of products by banks and High Street lenders has actually been the source of much public scrutiny of the payment protection insurance industry. Some mis-selling practices used by institutions lead to a super complaint from Citizen’s Advice to the Office of Fair Trading (OFT). On behalf of British consumers, the group alleged that some sellers were pressuring or deceiving borrowers into paying for expensive premiums for often unsuitable policies. They suggested some lenders pressure borrowers by implying that the loan is only available if it comes with the insurance protection.

However, following investigations and a referral to the Competition Commission, many of these household names have received fines for their sloppy sales tactics. This is positive all round as it has forced consumers to be more aware of what they are buying and from whom and has highlighted the need for them to shop around among the standalone provider such ethical, award winning provider British Insurance.

Certainly, loan cover from British Insurance can cost up to 80% less than it does on the High Street, and you know that you will be getting a quality product too So don’t let any negative publicity put you off buying loan insurance. It can be a financial lifeline for those people who suddenly lose their income - you just have to know where to buy it.

When you take out a loan, your provider will try to sell you loan cover as part of your loan arrangement. While this insurance can be beneficial, taking it from your loan provider is not always the most economical option.

Before we go into the economics of the policy, let’s look at what the cover can do for you.

Firstly, the policy will only pay out if you are faced with involuntary unemployment or you become unable to work. The named circumstances are redundancy, sickness and accident.

The policies are normally linked to a specific loan but if you take out a stand alone policy which is also known as payment protection, you can have the benefit paid directly to you.

The benefits are paid free of tax and can last for up to 12-24 months subject to the provider’s policy terms and conditions. Depending on the lender you can choose to be insured for just sickness or any combination of the named involuntary events.

The peace of mind you receive with loan cover is priceless. In addition you will have hard cash to keep your loan from falling into arrears which could lead to missed payments, a bad credit profile and this could prevent you from accessing cheap credit in the future.

Features

There are usually deferment periods of 30 -90 days that you must wait out before you could make a claim. In addition there are specific eligibility criteria that you must meet such as minimum age, residency status and number of employed hours.

There are maximum benefit levels attached to the policy which you will need to get from your provider.

Lenders often have a list of exclusions and it is wise to find out what they are. You’ll want to make sure that if you need to make a claim it will be successful.

A Note About Premiums

As stated earlier, getting your loan cover from your loan provider may not be the best option. Simon Burgess of the independent protection company British Insurance says ‘Some providers add on single premium products to the consumer loans and this could result in hundreds of pounds in extra debt which the consumer must repay’

By getting quotes from independent providers like British Insurance, you can save up to 80% on premiums for loan protection products.

The competition commission seems to agree with Simon Burgess as they are working on restricting lenders ability to sell consumers protection products as a single premium policy and within 14 days of a loan or other credit transactions.

Loan cover is very important especially if you don’t have State benefits, savings or family members to fall back on. It allows you to concentrate on finding a new job or returning to health because your loan payments will be maintained by the policy benefits.

There are many ways to cover yourself against some of life’s more unexpected events. From car insurance to health cover, there is an insurance product for just about everything you can imagine. Some people even choose to cover their ability to pay back debts with loan cover, which can be of great benefit to anyone who suddenly finds themselves out of work through no fault of their own. Although it may be a type of insurance unfamiliar to some people, the basics of the market are quite straightforward and policies can start from just a few pounds per £100 worth of cover.

People borrow lump sums of money for all sorts of reasons. Buying a new car is one big motivation, while other people look to spend cash on home improvements or even to help send children to university. Of course, all the money will have to be paid back to the provider with interest, and most of the time people will be able to do this comfortably, provided they have planned ahead.

But sometimes cash can dry up unexpectedly, perhaps because someone is made redundant or because they end up off work for a long period through illness or injury. Redundancy packages can be inadequate, and benefits such as job seekers’ allowance rarely stretch far enough to even cover the basics. Likewise, sick pay does not last forever, and few people’s savings would be enough to keep up with debt commitments for long periods.

Loan cover is a payment protection insurance product which guards against someone being stripped of their income through no fault of their own and suddenly left unable to keep up with a debt. Around a month after a successful claim is made the insurer will make a contribution on the behalf of the borrower towards the debt. Usually policies cover the minimum repayment amount, and can often be arranged to stretch to a higher percentage.

Say someone owes a lender £8,000, but is left out of work for over a year due to a car accident. A loan cover policy would kick in after around a month and provide someone with cash amounts towards paying back the loan. Depending on the insurer, this will continue until either the loan is paid off, the policyholder returns to work, or the policy expires. Most policies will continue to pay out for around a year, while a typical insurance policy will keep someone covered from 12 to 24 months.

Many banks and other loan providers will offer the borrower a loan cover product when they actually apply for the loan. This is known as selling a policy ‘at point of sale’, ie attached to a loan and is a method which has been known to give poor value to the customer. Instead, a borrower might like to try more independent companies such as the ethical British Insurance. Company managing director Simon Burgess said: “We do not offer loans, just cover, and as such strive to give our customers cheaper peace of mind compared to banks and other high street lenders.”

If you’ve ever taken out a loan, chances are your loan provider tried to sell you some payment insurance at the same time. This insurance is known as loan cover and it is used to keep up your payments if you are no longer in a position to do so yourself. With that being said, it should be noted that there are specific situations under which this type of policy will pay out.

In order to make a claim you must have been faced with involuntary unemployment and the three named areas are redundancy, accident and illness.

There are certain eligibility criteria that must be met such as applicants must be in full time employment, at least 18 years but not older than 65, a permanent UK resident etc. It is important to make sure you meet the eligibility criteria and read about any exclusions before hand so that if you need to make a claim it will be successful.

Features Of Loan Cover

Providers often allow the applicant to choose the type of cover they need. For example, you can choose to be covered for sickness and redundancy only or accident only etc.

There is usually a waiting period before a claim can be made and this could generally range from 30 to 60 days.

Main Benefits

In the case of involuntary unemployment, the policy will pay you an income for a period ranging from 12 to 24 months. This is the main benefit of this policy – having an income will keep you from having missed payments on your credit record which could lead to a bad credit history. If the loan is secured against your property you could lose your property, but with the insurance in place, you need not worry about any of that.

The income you receive is 100% tax free so you can spend every penny as you like.

Things To Know Before You Buy

Loan providers often try to sell their protection products on the back of loans as single premium policies. Simon Burgess of British Insurance says ‘This practice needs to be regulated more closely because by adding the protection as a single premium could add thousands of pound to the consumer loan and that is not treating customers fairly’.

The Competition Commission seems to agree with this statement as they are now looking in to companies who try to sell their protection products alongside their loans.

If you were to obtain a quote from an independent provider, you will also find that their premiums are much lower than the high street providers.

Conclusion

Because you can save a fortune on premiums by obtaining your loan cover from an independent provider, there is no reason to delay taking action. The benefits you receive far outweigh the small premium you will have to pay. For low premiums you receive the peace of mind that you will not face financial ruin if you were to lose your job.

Millions of people take out loans every year, and their reasons are varied from wanting to undertake a home extension to paying for a dream holiday. For this kind of expense borrowing is the only option for many ordinary people and most manage it comfortably. However, there is always the risk that someone will fall on bad times and suddenly be unable to keep up with the commitments attached to the loan. They may suddenly lose their income due to involuntary redundancy, or even fall ill or suffer an accident. Being told your services are no longer required is a real threat, especially in more uncertain economic times, and this is why many people look to loan cover as a possible solution.

This type of product is also known as loan payment protection insurance and can provide someone with a cash sum each month if they become unable to work due to being laid up with illness or injury or involuntary redundancy. All of these situations are quite stressful in themselves, and this type of insurance is designed to take away any added worry so the person can spend more time concentrating on getting back to normal.

The sums will be provided tax-free and will simply arrive in someone’s bank account following a successful claim. This will continue for between 12 and 24 months depending on the exact provider. When the first payment arrives the person is free to use it towards paying back their regular loan commitments. This initial helping hand will normally arrive between 30 and 90 days after someone first becomes unable to work. Some providers will even backdate their payments to the first day of the claim.

As with most types of insurance there will be a limit on how much a person can claim per month. The normal amount someone can insure is typically up to a maximum of £1,000 pounds or 65 per cent of their normal regular monthly salary, whichever is lower.

This type of cover also has varying protection levels. This means, for example, someone who has a job which involves a particularly generous sick pay structure may only want a policy which protects against involuntary redundancy. Likewise, anyone who is expecting a sizeable redundancy package might only want protection against accident and sickness. It is up to the individual to choose what is right for them.

Some people may shun this type of insurance because they are worried about the cost. Anyone who has been offered a form of cover at the same time as taking out a loan from a high street bank or lender may have thought what they were quoted was far too much. Historically, this type of protection tends to be far pricier than the type of cover which is provided by standalone financial insurers.

One such standalone loan firm is specialist payment protection provider British Insurance. These types of companies do not offer loans but simply offer cover for debts, and can often provide loan cover which is cheaper than the type offered by banks and may even be more effective.

Loan cover is a very valuable form of payment protection that can be taken out to insure a portion of your monthly loan repayment, which would be pre-agreed, against the fact that you could lose your income to redundancy, accident or sickness. The sum of money you insured when taking on the policy would be the income you received back if you fell victim to one of these events.

The money you received from your loan cover policy would go towards you being able to continue servicing your loan repayments and can make life a lot easier for not only you but the whole family. Without something to fall back on you might have to juggle bills around or have to make cut backs in order to get the money you need to continue meeting your loan repayments. It is a better form of back up plan than relying on savings as a means of getting by if you lose your income as savings could deplete well before you found work or had made a recovery.

You would just have to wait for the period of time stated in the terms and conditions of the policy before you would be able to put in your claim. With standalone independent payment protection specialist British Insurance this would be from the 30th day. There would be no excess with the cover as it would be dated back to the first day of you being unemployed or from you suffering incapacity. The protection would continue to payout with British Insurance up to the 12th month and then it would cease. If shopping around with other payment protection providers you would have to check to see when you would be able to make a claim on the protection as with some it could be as much as the 90th day. You also need to check how long the protection would pay out for as some providers will allow you 24 months in which to find work or make a recovery.

Loan cover can help to keep you out of court if you cannot afford to make an agreement with the lender to catch up on what you owe. If the loan is secured on your home then it can help you to avoid having it taken through repossession. A policy would also help you to maintain your credit rating and this is essential if you want to borrow again in the future. You credit rating is one of the main factors that is taken into account when you put in an application for credit of any kind and without a good rating you could be turned down. If you were given approval the lender could ask you to pay a high rate of interest.

You can choose to take out your loan cover independently rather than having it calculated into the loan at the time of borrowing. If you did take cover with the high street lender you might find that your loan costs almost as much as half again. Some lenders will work out the cost of protecting the loan over the term of the loan and then add in protection before adding in interest, this means you pay interest not only on the borrowing but also the payment protection itself. Choose to take a quote from ethical payment protection specialist British Insurance and you would be given a quote for premiums based on the amount you choose to protect and your age.

Loan cover secured with a standalone provider is taken by insuring a pre-agreed sum of your monthly loan repayment against the possibility that you might suffer accident, sickness or unemployment. This would be the sum of money that is paid back if and when you were to put in a claim on the policy. The income you received would be paid back as a tax-free sum and you can use it towards maintaining your loan repayments and keep on top of them.

If you were to fall behind on loan repayments due to a loss of income and not having anything to fall back onto then you would have to face the consequences of defaulting on the loan repayments. At the very least the first thing that would be affected would be your credit rating. Your credit rating is one of the main things taken into account when you apply for credit of any kind. If your credit rating shows missed payments then it likely that you would not be able to obtain credit or if you could you might have to pay a high rate of interest. You would of course have to repay what you owed by some means and in the case of a secured loan you could be at risk of losing your home to the lender.

If you chose to take out loan cover with standalone payment protection provider British Insurance you would begin to receive an income after the 30th day of you becoming unemployed or incapacitated. British Insurance would back pay on the protection to the first date that you become redundant or unable to work and they would continue to payout for up to 12 months. You would have to check the small print of polices offered by other providers as some might continue paying for up to 24 months. The terms might also differ when you are able to put in your first claim and with some providers this might be extended to as much as 90 days from your first day of unemployment or incapacity. Also check the small print for exclusions and compare these against your circumstances as these tell you if you would be eligible to make a claim. British Insurance supplies these on their website so you can make an informed decision before you take out cover.

Anyone who has the commitment of loan repayments to make each month should consider whether they are eligible to take out loan cover. When taking out this form of payment protection insurance (PPI) you can ensure that you would have an income towards meeting the demands of the repayments if you were to lose your own income after falling ill, suffering an accident or becoming unemployed as the result of being made redundant.

When taking out the loan cover you would insure up to a certain amount of your loan repayment which would be pre-agreed upon at the time of taking out the policy and this would be the sum that could be claimed back it you lost your own income. The money would be tax-free and would go a long way towards you being able to keep the repayments going. This would give peace of mind that allows you to search around for work or to concentrate on making a recovery and getting back to work.

If you fell behind on loan repayments then at the very least your credit rating would be affected and this could make borrowing in the future almost impossible. You would also have to make an agreement to pay back what you owe and if the loan was secured then you would be at risk of losing your home by defaulting on the repayments.

You would have to wait for a period of time before putting in your claim and this differs with all payment protection providers so you would need to check the terms of the cover. Some providers such as ethical payment protection specialist British Insurance would pay back on the protection to the first day of you being unemployment or incapacitated. Cover from them would pay you an income after the 30th consecutive day of being unemployed or incapacitated and would then continue to provide you with an income for up to 12 months.

The terms of some policies could state that you are unable to put in a claim until at least 90 days of unemployment or from being made redundant. Along with the period of deferment extending some providers could also extend the length of time that they would payout on the policy, this can be up to as long as 24 months and then the cover would cease.

Loan cover is a far better back up plan to keep on top of your repayments then relying on being able to claim benefit from the State. You could be entitled to receive some money from the State but this might not be enough for you to live and continue meeting the demands of your bills. Savings could also be a let down as they could run dry well before you have got back to work or have found work. Providing you have checked the exclusions in payment protection against your circumstances you would have a reliable plan on which to fall back if the worst should happen and you lot your income. British Insurance supplies the exclusions on their website so that you are able to check for eligibility before taking out the cover.

Loan cover can be taken out to protect the repayments of loans against the possibility that you could be made redundant or suffer an accident or illness that would mean you were unable to work. You could insure a portion of your loan repayments which you would pre-agree with the lender at the time of taking out the cover and this would be the tax-free sum you got back if you made a claim on the protection.

Loan cover is often pushed at the time of you taking out the borrowing with the lender. However in the majority of cases this would be one of the dearest ways for you to protect your repayments. Lenders on the high street are well known for the high priced policies they sell as a way of making an estimated £4 billion in profits. In some cases the cheap loan you take out can be almost doubled with loan protection added on especially if the lender chooses to include the cost of protection for the repayments and then adds in interest. If this happens you would not only pay interest on the amount you were borrowing but also on the protection. If you choose to get a quote from independent payment protection specialist British Insurance you would be able to secure your cover for up to 80% less than the high street providers.

A policy to protect your loan repayments from British Insurance would begin to supply you with an income after you had been unemployed or incapacitated for at least 30 days. They would then pay back on the cover to day one of you being made unemployed or incapacitated and your cover would supply you with an income for as long as the 12th month if it was needed. When shopping around and comparing policies you might find that some providers could pay an income for as long as 24 months. You would also have to check the start date of the protection with the provider as some might ask that you defer from claiming for up to as long as the 90th day.

Loan cover could make a huge difference to your lifestyle if you should lose your income as the result of unemployment or incapacity through no fault of your own. Without a policy if you fell behind into arrears with the repayments you would see your credit rating being affected. As this is what all lenders look at when they are deciding to approve your application for a loan you could be turned down. It can a lot longer to repair your credit rating than it did to see it decline. In the worst case if you have taken out a secured loan the lender could take you to court and you might have your home taken from you due to repossession.

Loan cover would be able to protect the repayments of your loans against the possibility that you might lose your income due being made unemployed or if you were to become ill or suffer sickness that meant you were unable to work. The lender would still expect you to be able to meet your repayments regardless of your circumstances and if not and you fall into debt with the payments you would have to face the consequences.

Loan cover could be taken by insuring a pre-agreed sum of the repayments of the loan each month and then you would use this sum back if and when you had to put in a claim on the protection. The tax-free income would go a long way towards you being able to maintain the repayments and it could stop debt from piling up.

If you do get into debt you would see your credit rating being affected and this can make borrowing in the future almost impossible. If the lender did approve you for credit you might have to pay a high rate of interest. Depending on the type of loan you have fallen into debt with would all depend on the consequences. If you had secured the loan against your home then you could be at risk of losing your home. Unsecured loan debts could also lead to a court appearance and bailiffs might be able to take your possession to sell so the lender can get back what you owe. If you want to stop this from happening then you can take out loan protection for just a small sum each month.

You could take out loan payment protection for up to 80% less with British Insurance than with the lender on the street. High street lenders usually offer high priced payment protection which has been known to boost up the cost of the loan by almost half again. In some circumstances insurance is added into the loan without you even realising it and this means you could be paying for cover that is not needed or that you are unable to claim against due to the exclusions. If you choose to take out cover with an independent payment protection provider such as British Insurance you would be given the exclusions on their website so that you can check suitability before you take on the protection.

Loan cover can be a great choice and is a far better and more reliable option than relying on being able to claim State benefits. Even if you can claim help from the State the money you are entitled to might not be enough to so that you can continue meeting all of your outgoings which would include your loan/credit card repayments. Benefit often falls far short of the income you are used to receiving and this could leave you struggling with your bills. You might also be let down with savings if you are relying on this as a means of paying your credit card. You could have to take many months to recover and it might also take you many months before you would be able to find work again.