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.
For many years I have been a staunch campaigner against the major names in finance who, I believe, rip-off their customers by selling over priced, often unsuitable payment protection insurance (PPI) cover.