Loan Payment Protection Cover Still Causing Much Confusion
by: Simon Burgess
Despite recommendations set out by the Financial Services Authority (FSA) for changes in the payment protection sector, there are still many shortcomings that need to be dealt with. The FSA and Competition Commission are still investigating the sector and continue to hand out fines to those that mis-sell polices. But in this climate of change it is important to remember that loan payment protection cover is still worthwhile, as long as you make sure your policy suits your circumstances. The FSA has handed out fines totalling over £1 million during their investigation, with the most recent being in 2007 after its guidelines were set out. Seven firms have felt the heavy hand of the FSA and fines will continue if the mis-selling continues. There have been some improvements in selling, including firms improving sales techniques, but there is much more to be done. The majority of problems with loan cover policies come when they are sold alongside the loan itself. Often little or no information is given regarding the exclusions present in the polices. Commonly individuals who fall under the categories of retirement, self-employment, being in part-time work or suffering an ongoing illness are not eligible for a payout under a policy. However, it is worthwhile delving into the terms and conditions. For example, if the illness has not occurred within the past two years you could still benefit from a policy. You also have to be careful when it comes to being eligible to claim for becoming unemployed. The majority of policies will state that you have to have been in the same employment for a period of time, which is usually no less than one year. If you meet the criteria for loan protection insurance then your policy usually begins to pay out from between 30 to 90 days of being unable to work. The cover will provide an income if you should become unable to work due to an accident, sickness or unemployment. Once a policy had kicked in then it would continue, if it was needed, for between 12 to 24 months. The money you get each month is enough to continue making your monthly loan repayments without worrying about where to find the money. Getting behind on your loan or credit card repayments would mean you would gain a bad credit rating at the very least. Loan cover can give you peace of mind and the security of an income that allows you time to recover and get back to work. When thinking of taking out loan payment protection cover there are other factors which have to be taken into account. For example, you should see whether you have any savings that you could fall back on in the short term if you were out of work. And you should never be pressured into taking out loan cover along with the borrowing because the loan does not depend on taking cover out with the same lender. If taking your loan out online be very wary of lenders using the pre-ticked box to include protection in with the cost. Finally, always buy a policy from a standalone specialist provider, because this is where you will get the best advice and information regarding all aspects of the product.
Thursday, July 17, 2008
Loans Payment Protection
The Basics Of Loan Payment Protection
by: Simon Burgess
Not understanding loan payment protection is the number one fault associated with mis-selling. Providing cover is suitable then taking out a policy to cover your loan repayments can save you from getting into debt and give you peace of mind and the security of an income each month. This income is used to cover your loan or credit card repayments and is tax free. Loan insurance premiums can vary a lot and the cheapest way to take out a policy is to go with a standalone specialist provider. By choosing to buy cover after taking out the loan you will not feel as though you are getting pushed into the cover and you will be able to take your time going over the terms and conditions. An independent provider will always make this information available. A policy could start to pay out if the policy holder was out of work due to an accident or illness, or through unemployment such as redundancy. The policy holder waits a period of time before receiving a payout, which usually comes 30 to 90 days after being out of work continually. The policy pays out a tax-free income for up to 12 months, or for up to 24 months with some providers, which is usually enough time to recover and get back to work. You do have to make sure that a policy would be suitable for your circumstances before you buy. This is due to there being terms and conditions that can stop you from claiming. The exclusions most regularly found include being retired or self-employed, suffering an illness or only working on a part-time basis. But these exclusions are not set in stone; for example, providing the illness has not occurred within the last two years then cover might be suitable. Beware of borrowing online and if you do pay attention to whether loan protection cover is already included. Online lenders have in the past included loan protection as standard unless a box is un-ticked. While the majority of lenders have now put an end to this to avoid confusion, it is worthwhile double checking. The same goes when taking out a loan with the high street lenders, because they have also been known to add in the cover and then add interest onto the total amount. This, of course, can almost double the cost of what was a cheap loan and is the most expensive way of purchasing peace of mind. When buying a protection policy for your loan make sure you know whether you will pay a single premium or regular one. If you pay a single premium then lenders will charge around three years’ premiums upfront, which you are expected to pay in one lump sum. You also need to pay attention to any clauses relating to early repayment of the loan. Always check to make sure what you would be able to claim back if you should take the loan out then find out you can afford to repay it early. While loan payment protection can work and give you a much needed income it does only pay out for a maximum amount of time. While in the majority of cases the individual will return to work within this period, occasionally they remain unable to work for a longer period. Therefore, you must consider how you would be able to maintain the repayments if you should remain off work once the cover stopped providing an income.
About The Author
Simon Burgess is Managing Director of the award-winning British Insurance (http://www.britishinsurance.com), a specialist provider of low cost income payment protection insurance (PPI), mortgage payment protection insurance (MPPI) and loan payment protection insurance.
by: Simon Burgess
Not understanding loan payment protection is the number one fault associated with mis-selling. Providing cover is suitable then taking out a policy to cover your loan repayments can save you from getting into debt and give you peace of mind and the security of an income each month. This income is used to cover your loan or credit card repayments and is tax free. Loan insurance premiums can vary a lot and the cheapest way to take out a policy is to go with a standalone specialist provider. By choosing to buy cover after taking out the loan you will not feel as though you are getting pushed into the cover and you will be able to take your time going over the terms and conditions. An independent provider will always make this information available. A policy could start to pay out if the policy holder was out of work due to an accident or illness, or through unemployment such as redundancy. The policy holder waits a period of time before receiving a payout, which usually comes 30 to 90 days after being out of work continually. The policy pays out a tax-free income for up to 12 months, or for up to 24 months with some providers, which is usually enough time to recover and get back to work. You do have to make sure that a policy would be suitable for your circumstances before you buy. This is due to there being terms and conditions that can stop you from claiming. The exclusions most regularly found include being retired or self-employed, suffering an illness or only working on a part-time basis. But these exclusions are not set in stone; for example, providing the illness has not occurred within the last two years then cover might be suitable. Beware of borrowing online and if you do pay attention to whether loan protection cover is already included. Online lenders have in the past included loan protection as standard unless a box is un-ticked. While the majority of lenders have now put an end to this to avoid confusion, it is worthwhile double checking. The same goes when taking out a loan with the high street lenders, because they have also been known to add in the cover and then add interest onto the total amount. This, of course, can almost double the cost of what was a cheap loan and is the most expensive way of purchasing peace of mind. When buying a protection policy for your loan make sure you know whether you will pay a single premium or regular one. If you pay a single premium then lenders will charge around three years’ premiums upfront, which you are expected to pay in one lump sum. You also need to pay attention to any clauses relating to early repayment of the loan. Always check to make sure what you would be able to claim back if you should take the loan out then find out you can afford to repay it early. While loan payment protection can work and give you a much needed income it does only pay out for a maximum amount of time. While in the majority of cases the individual will return to work within this period, occasionally they remain unable to work for a longer period. Therefore, you must consider how you would be able to maintain the repayments if you should remain off work once the cover stopped providing an income.
About The Author
Simon Burgess is Managing Director of the award-winning British Insurance (http://www.britishinsurance.com), a specialist provider of low cost income payment protection insurance (PPI), mortgage payment protection insurance (MPPI) and loan payment protection insurance.
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