In the last five there has been a lot of controversy concerning loan cover in the media. It stemmed from the fact that providers were including the cost of cover when producing loan quotes for customers. The provider did not explain this to the consumer and this caused many customers to purchase a product they were not aware they were purchasing.
Since then the Financial Services Authority has began to regulate the market more tightly and providers are now required to be more transparent. Despite this, the fact remains that loan cover is an essential addition to any loan you take.
The policy will pay out a tax free cash sum if you are faced with involuntary unemployment, accident or sickness. No doubt these events can reduce or wipe out your regular income. The benefits will be used to maintain your loan payment until you recover or return to work.
Please note that if you wanted to take coverage from one or two events only, your provider should be able to produce a quote on this basis.
To apply for a policy you must be at least 18 years old, a resident of the UK and you must meet specific employment requirements.
You will be able to make your first claim after the deferment period had passed. The typical deferment period is 30 – 90 days after the covered event.
Some consumers may be surprised to learn that loan cover will not replace their entire salaried income. Because providers have maximum benefit levels, they will only pay a percentage of your gross income or typically up to £1,500 whichever is lesser.
When selecting your policy therefore, you will need to take into consideration the maximum paid and evaluate that against the amount you need for your loan payments.
Another point to note is the exclusions attached to the policy. It is important to note what these are because if it applies to you, you may never be able to claim on a policy even if you have been paying the premiums.
If you were to lose all or part of your regular income, do you have savings or state benefits to rely on? If not the benefits from the policy will keep your credit profile clean as you won’t have any missed payments.
The policy also provides peace of mind. You won’t have to worry about creditors calling or red letters. If you are on your sickbed for example all you will need to do is concentrate on getting better.
One final note, when shopping for loan cover, independent providers often carry the best rates. The cost of premiums is much lower than that of banks and high street companies.If you were to lose your job or fell ill and you want to ensure your loan is paid, then the protection of this insurance that will help achieve that aim.
Related Posts