Loan protection insurance could stop you from falling into debt and being taken to court by your lender if you cannot repay what you have fallen behind on. This is due to the income that the policy provides which is up to so much of the repayment you make each month. The provider would have to agree to this amount as there would be a limit and once agreed this becomes the income that you could claim back if you were to have to claim due to incapacity or unemployment.
The policy would payout your income once a period of deferment had passed. This could be between the 30th and up to day 90. Some providers might offer to date back your benefit to day one of you first losing your income to unemployment or incapacity but this needs checking before you take out your policy. You also have to find out how long your loan protection insurance policy might continue to provide your income. With some providers a policy could be claimed upon for over 12 months and with others you could be able to claim if needed for as long as the 24th month. If you were taking out your policy with payouts over 24 months then the premiums would work out more than cover paying over a 12 month period if you should need it. Also give some thought to the fact that your insurance would cease providing your benefit if it should reach its term.
You also need to be aware of any exclusions that might be in your policy as there will be some in policies offered by all providers. Some could include just the most basic exclusions while others might add in many more. For instance working full time would be a necessity and you also have to be in work for a certain period of time before taking out your policy. Usually you would have to live in the United Kingdom or Isle of Man or the Channel Isles in order to take out protection. These exclusions would have to be checked against your lifestyle to ensure that the policy would be suitable and an ethical provider would ensure that you have this information before you take out the cover.
You might take out loan protection insurance to supply an income for either redundancy or incapacity. You could also choose to tailor your policy and take out protection that would pay out just for incapacity alone or just for redundancy alone based on your needs. Also check with the provider to find out if your policy could be claimed on if you were to have to give up work to take care of a member of the family who was incapacitated and needed full time care. However the provider would have to be generous to give you this added form of protection.
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