Insurance can provide peace of mind in many different situations. The most common type of cover involves car insurance, and this is the type of policy most people will be fairly familiar with. However, it is also possible to insure things like financial commitments. For example, most adults hold a credit card, which despite the attractive marketing and different types of rate, is essentially a straightforward debt. Accordingly it carries certain risks including the threat of higher interest and even court action if someone falls behind with repayments. This has led some companies to offer a type of credit card cover which protects someone’s ability to pay if they suddenly find themselves without an income through no fault of their own.
A basic policy works like this - if someone loses their salary through being made redundant involuntarily, or through falling ill and being laid up, or through ending up out of action due to accident, the insurer will pay off a percentage of their outstanding credit card balance each month until they are back fending for themselves again. This not only keeps the credit card company happy, but also means the policyholder can concentrate on finding work or getting better without having to worry about their plastic-related debt.
Some credit card companies will offer a person a payment protection insurance policy of this type when they actually take out a card. These types of policy have been accused of being overpriced in many cases. Furthermore, the competition commission is still investigating the payment protection sector after some high street firms were found guilty of mis-selling insurance policies of this type to people who did not qualify for them.
This has meant bad publicity for the lenders in question but has made the sector more open and has also thrown light on some of the more independent companies which offer standalone cover, sometimes at a far cheaper price.
Whoever provides the insurance, the basics of the policy will normally be quite similar. In exchange for a regular premium, the insurer agrees to provide a percentage towards the credit card balance for each month the person is without work through no fault of their own. Some exclusions apply such as pre-existing medical conditions which someone was suffering from before they took out the insurance policy. Payments will normally continue for up to 12 months or until someone gets back on their feet and starts paying back the card company themselves, which ever happens sooner.
An example of the kind of company which may be able to provide this kind of protection cheaply and effectively is the ethical British Insurance. As a standalone provider, the firm has a strict attitude towards balancing commission levels with value for its customers. Company managing director Simon Burgess said: “Firms like ours, which are more independent, specialise in just this type of policy and do not rip off our customers by tagging expensive insurance products on to loans. Credit card cover can be important but it need not be expensive.
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