Archive for the ‘Loan Protection Insurance’

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.

“How much longer must the long-suffering consumer be held to ransom by unscrupulous and avaricious lenders?” – asks Simon Burgess of independent insurance providers, British Insurance, who complains that “loan protection insurance is still being sold at extortionate prices by banks and other lenders under the pretence that it is somehow obligatory”.

Long time champion of consumer interests when it comes to loan payment protection insurance, Simon was commenting on what just the latest penalty imposed by industry regulators on yet another bank found guilty of “serious mis-selling” of the product. Early in October 2008, the Alliance and Leicester was fined a record £7 million by the Financial Services Authority for failing to make clear to its customers that loan protection insurance was optional and instead applied unfair pressure by automatically including the premiums as a matter of course when preparing quotations for loans.

Alliance and Leicester has been by no means alone. Earlier in the year, a subsidiary of HSBC, HFC Bank, was fined more than a million pounds for treating their customers similarly unfairly. Penalties such as this continue to come despite highly critical reports by the Office of Fair Trading and an especially rigorous investigation by the Competition Commission beginning in February 2007 and not scheduled to finish until early in 2009.

It remains beyond the shadow of a doubt, however, that many high street lenders have seriously misled many customers – some of whom would not even have been eligible for the benefits for which they believed themselves insured. Equally certain is the fact that those same lenders have been making excessive profit from the sale of an over-priced product. As the Telegraph newspaper pointed out in its report of the 14th October 2008, lenders stand to earn an average of £1,200 on every payment protection policy they sell. Since the costs involved in selling each policy are estimated to be only £20, the profits are clearly enormous.

Amidst all the proper and well-placed concern about the mis-selling of loan protection insurance, it is easy to lose sight of the fact that its purchase – at a competitively modest price from an independent provider – makes a great deal of sense. Bought as a completely standalone policy, such insurance will ensure that the loan repayments continue to be covered, even if the policy holder needs to take time off work to recover from an accident or illness or is out of work following a compulsory redundancy. Now that the economy has been formally described as having fallen into recession, the risk of redundancy – now and for many months to come – has increased for many more people, making the purchase of reliable and affordable loan protection insurance even more sensible than before.

Loan protection insurance can help to secure the monthly repayments of your loan and it can also help you to maintain your credit rating. Your credit rating would be affected if you should fall behind on the repayments and if this happens you could have a hard time being able to get credit of any kind in the future as all lenders take your rating into account.

You would take loan protection insurance by insuring an amount of your loan repayment, which the provider would pre-agree, against the chance that you could lose your own income to incapacity or unemployment. The amount you chose to protect would be the sum that you received back if you then suffered from one of the events. The money received from the income the policy supplied would then go towards you being able to maintain the repayments of the loan. This will allow you peace of mind at least for the duration of the protection which would depend on the provider.

Standalone payment protection specialist British Insurance supply protection that would begin to payout once you had been unemployed or incapacitated for 30 days. They will also backdate the income to the first day that you became unable to work or became a victim of redundancy and then continue paying out for up to 24 months depending on the policy. If you choose to compare cover with other providers you need to check the terms of the cover as there are some providers that would continue paying out for up 12 months only. You also need to check to see when you could put in a claim as some could state you have to wait for up to 90 days of unemployment or incapacity.

Loan protection insurance would come with some exclusions and these would need checking against your circumstances to ensure that you would be eligible to claim. If you choose ethical British Insurance they would provide you with the information you need and they add in just a few exclusions compared to other providers. Providing you have checked for suitability before taking out the protection you would have a back up plan to fall back onto if you were to lose your income. It would be a better solution than relying on being able to claim an income from State benefits. You would have to be eligible to claim from the State and often the little money you would receive from them might not be enough to live on and maintain your outgoings. If you were going to rely on savings as a means of taking you through unemployment or incapacity you could also be let down as you would not know how long you would have to turn to them. It can take many months to find work and it could also take the same to make a full recovery and get back to work and savings could run out well before then.

It must be one of the most-maligned of all financial services products, yet loan protection insurance most certainly has its place in the range of safeguards for the family finances. So why has loan protection insurance earned such a bad name for itself and why is that poor reputation so misplaced?

First of all though, a reminder is in order about the purpose of loan protection insurance (or loan payment protection insurance, to give it its full title). For all the words written about it, it is deceptively simple and straight forward. Just as the name suggests, it is a form of insurance designed to ensure that repayments on a loan continue to be made even if the borrower is unable to work (and might therefore suffer a temporary interruption of his or her regular salary) because of an accident, sickness or involuntary unemployment.

It has gained a poor reputation, however, because of the way it has been extravagantly mis-sold by lenders of the very loans the insurance is designed to protect. Many such lenders seized the opportunity of earning valuable commissions on the sale of the related loan protection insurance, but did so without consideration of the customers’ actual needs, by misleading those customers and by overcharging on the price of the insurance policies sold. This sorry catalogue of mis-selling is not the product of a handful of disenchanted customers, but has been revealed in investigations by the industry’s own regulators as a fairly widespread practice by many lenders, including some big high street names.

As a result of these instances of brazen mis-selling, therefore, loan protection insurance became something of a dirty word. This has been unfortunate to say the least, because this type of insurance offers valuable protection for the policy holder’s financial health and good standing when some of the most common misfortunes – accident, sickness and unemployment – strike. Without the protection of such insurance, many such borrowers would be in peril of defaulting on their loan repayments and thus acquiring the kind of adverse credit rating which will take several years to shrug off and make borrowing in future so much more difficult and costly.

Fortunately, however, there is a way of purchasing loan protection insurance without exposure to the perilous mis-selling techniques of many high street lenders. Of course this kind of insurance is immensely valuable, but it does not have to be bought from the lender. Many independent, specialist insurance providers – such as market leaders, British Insurance – will readily arrange standalone loan protection insurance and do so only after carefully matching customer needs to the particular policy required and by offering a competitively-priced product.

Juggling commitments like rent or a mortgage, credit card bills and other regular outgoings can sometimes feel quite simple when a wage is coming in regularly and the bank balance is in order. But should someone have their salary taken away from them through no fault of their own, things can suddenly get tight rather quickly, and this is why some borrowers opt for loan protection insurance - a form of cover which actually protects someone’s ability to keep up with their debts.

Say someone has an £80 commitment on a credit card bill per month and a further loan of £100 a month. That’s £180 which would not be paid on two different loans if the person in question suddenly lost their income. That’s also two sets of creditors who would be sending reminders and even looking to take court action. This level of risk means taking out a policy in exchange for a premium to cover these payments can seem like a good deal.

A policy will only payout in the event of a successful claim - that is, someone suddenly finds themselves without an income due to suffering an accident, illness or being made redundant involuntarily. It will then deposit a lump sum, tax free, into someone’s bank account towards their monthly commitments - the idea being to keep creditors out of the way while a person gets back on their feet or lands new employment. The policyholder will receive this benefit for anywhere up to 12- or 24 months depending on the provider – or when they get back to work, whatever is sooner. To qualify for loan protection insurance someone must usually be over 18 and have been in a form of regular employment for a while, normally around 12 months.

However, the loan protection insurance market is not one without its problems. As a payment protection insurance product it has come under close examination thanks to the accusation last year that some providers were mis-selling policies to people who did not qualify for them. This meant that in some cases people were sold cover on an unethical basis - ie the policy they were sold would not have paid out because their employment status or similar meant they were excluded.

In turn, this has meant some people have turned to the kind of companies who specialise in selling the cover as a standalone product, supplying just this kind of cover at a high level of value to the customer. Specialist and independent insurer British Insurance is one of these firms, and can provide loan protection insurance for just a few pounds a month for every £100 worth of cover required.

Loan protection insurance could be taken out to safeguard a portion of your loan repayments against the possibility of accident, illness or unemployment. You would insure a pre-agreed portion of your loan repayment with a payment protection provider and then receive this sum back, tax-free if you became redundant or incapacitated.

The sum of money would then go towards you managing to service the payments each month and avoid falling behind. If you were to fall behind then your credit rating would be affected. This is one of the main factors that are taken into account when you apply for credit of any kind. If you have a bad rating due to missed payments the chances are your application would be denied. Of course an agreement with the lender would have to be made to pay back somehow or they could start court proceedings. With a policy behind you there would at least be some money coming into the home towards paying on time.

To get the best deal on the premiums you would need to shop around and buy the loan protection insurance independently. If you looked with independent payment protection provider British Insurance, who is one of the leaders in payment protection, you would save up to 80% on the protection. You would also get a policy that comes with very few exclusions and no excess as the cover is backdated to day one of unemployment or from you being unable to work.

You could put in a claim and begin to receive an income from the 30th day of your unemployment or from being unable to work and the protection would then continue paying for up to 12 months. During this time you would be able to search for work or concentrate on making a recovery and getting back to earning a living. If you chose to shop around with other providers you would need to check the terms of their policy as some could ask that you defer from putting in your claim until the 90th day. You also need to check to see how long you would be able to benefit from the cover as some providers pay out for as long as 24 months.

Loan protection insurance is a far better form of back up plan to rely on than savings as any savings you have could run out if you had to rely on using them for a long period. It is also a better plan that risking being able to claim money from the State. While you might be entitled to receive State benefit often the little money you are entitled to receive falls short of the income you brought home when working. At least with payment protection insurance behind you, you would have comfort knowing a payment was coming into the home for the duration of the cover.

Loan protection insurance can help you to protect the repayments of your loans and so stop you from falling into debt and having to meet the consequences should you become unable to work due to accident, illness or unemployment via redundancy. These consequences would depend on the type of the loan you had taken out and the amount you owe. At the very least your credit file would be affected and this means that borrowing in the future could be next to impossible.

Loan cover can be taken out by you insuring up to a pre-agreed amount of your repayment and then claiming this back as a tax-free income. The sum would go a long way towards ensuring that you do not fall into debt. It provides you with peace of mind that you would not be at risk of the lender starting proceedings to take you to court. In the worst case if you have secured the loan on your home you could be at risk of losing it to the lender..

If you were to choose an independent provider such as British Insurance as your payment protection provider you would receive an income each month for up to 12 months should you make a claim. You would have to wait for up to 30 days before you put in your claim and British Insurance would pay back to day one of you becoming ill, suffering an accident or if you were to become unemployed by such as being made redundant.

You would need to check out the terms and conditions of any loan protection insurance you were considering taking out if you shop around with other providers as some could continue paying for up to 24 months. You would also have to check out the terms of the policy to find out when it would begin to provide you with your income as some providers would state you would have to wait for up to 90 days.

Loan protection insurance also comes with some exclusions and the amount that will be included would depend on the provider. British Insurance puts in just the most frequently found exclusions but some providers can add in many more. They also provide you with the information regarding the exclusions so that you know if cover would be suitable. It is essential that you check the exclusions against your circumstances as these are what determine if you would be able to make a claim.

Loan protection insurance comes with cheaper premiums if you choose to shop around with a standalone payment protection provider online. You could save as much as 80% on covering your loan repayments if you choose to take out cover with independent provider British Insurance. Choosing to buy protection this way not only gets you the biggest savings but also provides you with information so that you can ensure a policy would be suitable.

You would be able to secure your loan repayments by insuring up to a certain amount of the repayment you make each month. This amount would be agreed upon when taking out the protection with the provider and would be the sum of money that you would claim back each month as a tax free payment if you lost your income. You can insure against the possibility of becoming unemployed by redundancy or falling sick or suffering from an accident.

The sum of money that was paid back each month through loan protection insurance would go towards you being able to maintain the repayments each month without the worry of falling into debt. If you have taken out a secured loan on your home and get into debt with missed payments then the lender could choose to repossess your home. Unsecured loan debts can also mean the lender would start court proceedings and this could result in bailiffs coming into the home and taking possessions in order for the lender to recoup what you owe. In all cases of missed payments your credit rating would be affected and this means that being able to obtain credit of any kind in the future could be almost impossible. In many cases if you have a bad credit rating you could expect to pay a higher rate of interest for the luxury of being approved for a loan.

Loan protection insurance from British Insurance would pay you an income each month you continued to be unable to work or unemployed for a period of 12 months. After the policy has reached its term it would just expire. If you choose to shop around for a quote for the protection then always ensure that you read the small print. This is where you can find out when cover begins and how long it pays out for. Some providers could offer 24 months of protection and the terms and conditions are where this will be stated. Checking the terms will also reveal that some providers could ask you wait for a period of up to 90 days before they would begin to payout on your cover.

Loan protection insurance can keep you out of debt if you lose your income as the result of becoming unemployed or suffering from an accident or sickness. If you shop around with independent providers then you can save up to 80% on the cost of premiums if you choose to get a protection quote from British Insurance.

Loan protection insurance is taken out by insuring up to a certain amount of your loan repayments which would be pre-agreed at the time of taking out the insurance. This sum of money could then be claimed back if and when you needed to put in a claim and would go a long way towards you being able to keep up with the repayments of your loan repayments.

If you do fall behind on loan repayments you would have to face the consequences and these would vary. The first problem you would face when you miss payment would be the fact that your credit rating would be affected. As this is what all lenders look at when you apply for a credit of any kind you could find it next to impossible to get approval and even if you do you might have to pay over the odds for the interest rate. If the loan is secured on your home you could be at risk of losing your home to the lender. Unsecured loan repayments could mean the lender might start court proceedings and you could have bailiffs come into your home and take your possessions. All of this can be stopped by taking out loan payment protection.

If you take out the protection with independent payment protection provider British Insurance you would be able to make a claim on the protection once you had been unemployed or incapacitated for at least 30 consecutive days. They would back pay on the protection to the first day of you being unemployed or incapacitated and you would have 12 months of protection in which to recover or to find work. There might be some providers that could offer to payout for up to 24 months and other providers might ask that you defer from putting in your claim until as long as the 90th day of being unemployed or incapacitated.

There are certain exclusions in all forms of payment protection and loan protection insurance is no exception. These would have to be checked against your circumstances before taking out the protection if you are to be sure that you be eligible to claim. British Insurance makes these available on their website so that you are able to make an informed decision regarding the suitability. British Insurance adds in just the most commonly found exclusions in their protection but you would have to check the terms as all providers will differ.

Loan protection insurance is taken out for repayment security for loans and credit cards if you fall ill or suffer an illness that would mean you would be unable to work or if become unemployed as the result of redundancy. In all of these cases you would lose your own income and would have a serious struggle on your hands to be able to continue meeting your repayments. Even if you are one of the lucky ones that would get full sick pay you would only get this for so long.

Loan protection insurance is typically cheaper if you choose to take it out with an independent payment protection provider. An independent specialist would allow you to cover up to a certain amount of your loan or credit card outgoings each month and this is the sum of money that you would claim back. This sum would go a long way towards you being able to finance your repayments and keep out of debt. If you choose British Insurance as your provider your premium will be quoted on how old you are when you take out the policy and the amount you insure. Age based policies are excellent for the younger generation and allows them to be able to afford to cover their huge borrowings.

With independent specialist British Insurance you are able to take out cover that would begin to provide you with your income from day 30 of being made unemployed or from being made redundant. The policy would then be backdated to the first day that you were unable to work or from being unemployed and then it would continue for up to 12 months maximum. There are some providers that might offer 24 months of protection and others could state that you are unable to put in a claim until the 90th day.

Loan protection insurance would let you concentrate on making a recovery or allows you to search for work knowing that you are not going to fall behind with payments. Without something to fall back on you would be at risk of getting into debt with the repayments and not being able to catch up. Depending on the type of loan you take out would all depend on the consequences that would about through missed payments. In all cases you would have your credit rating affected and this would mean that you could find it very hard to get approved for credit in the future. All lenders take your credit rating into account and it take a lot longer for this to mend than it does to destroy it. If the loan is secured on your home then you are risk of losing your home to the lender. An unsecured loan could mean that the lender would take you to court and you could have bailiffs taking your belongings to sell to recover what you owe. You are able to avoid the worry of this with a loan protection policy taken from ethical British Insurance.