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.
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