When someone has all their finances in order, keeping on top of a secured or unsecured loan can seem quite straightforward. Budgeting plans can help someone keep up with their debt commitments and ensure that borrowing money is not unnecessarily stressful. However, sometimes an unexpected event can leave someone suddenly in the lurch and facing the possibility of not being able to keep up with repayments. Losing a job through involuntary redundancy, or ending up without an income due to a long term illness, may seem like an unlikely occurrence but it does happen to many people. A loan protection insurance policy can help take away the worry of what would happen if someone fell on such hard times and faced struggling to pay back a debt.
A form of financial insurance, this type of policy will provide someone with a lump sum amount of cash per month following a successful claim, which they can use to keep up with their debts. Most basic policies cover someone if they lose their income due to falling ill, being laid up with an injury following an accident, or if they are made involuntarily redundant.
The cash simply arrives in someone’s bank account tax free each month to help them with repayments, possibly saving them from unwanted attention from creditors and even safeguarding their credit rating, which could protect their ability to get credit in future. Policies will pay out for 12 to 24 months, depending on the insurer, and to qualify someone must be at least 18 years of age and will need to have been in a job for a set period.
There are a few restrictions to this kind of cover and a loan protection insurance policy will not payout if someone is simply sacked from a job or if it can be shown that they were given some form of prior indication that they were going to be made redundant before they took out the policy.
Some high street banks and high profile lenders have come under criticism for selling this type of insurance attached to loans. Some consumers may even have wrongly thought they had to agree to take out their lender’s policy in order to get the money. In reality someone is entitled to accept the loan which has been approved for them but turn down the insurance which may be attached. A company such as the ethical British Insurance can save consumers up to 80 per cent on loan protection insurance thanks to their more independent status and attitudes towards commission for employees.
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.