If you have loan repayments to make each month then it could be wise to take out loan payment protection to cover the possibility that you might find yourself unable to work. If you should have an accident, suffer an illness or become unemployed through such as redundancy then a policy would provide a monthly tax free sum to cover your monthly loan commitments.



Loan protection insurance can work but you have to ensure that you check the terms and conditions of a policy before rushing into taking it out. There are exclusions which are to be found in all loan cover and there are also ones that can be added by particular providers. Those individuals who are working on a part time basis, who are self-employed, suffer a pre-existing medical condition or who are retired would probably find a policy not suitable. Reading the wording of any policy is essential as the terms and conditions can vary as can the amount you pay for the cover.

The premiums charged will be based on how old you are at the time of applying and the amount of your loan repayments. Historically, a standalone provider will always offer cheaper loan protection insurance than the high street lender.

Consumers should note that while cover is usually offered at the time of borrowing this can be very costly. High street lenders are thought to make around ?4 billion in profits when selling payment protection insurance cover. However this is not quite clear and the Competition Commission are going to do everything in their power to force lenders to open their books and reveal their profits.

In 2005 several high street names received fines when the Office of Fair Trading received a super complaint from the Citizens Advice. Fines were handed out for mis-selling which focused on the poor advice given to the consumer at the time of taking out a policy. Loan payment protection was sold to individuals who could not possibly hope to claim against the cover.

In March 2008 it is hoped that the introduction of comparison tables will lead to making loan insurance more transparent. The tables will highlight how much a policy will cost, show the exclusions and help the consumer to choose the right type of cover. Until then an independent provider can be relied upon to provide the answers to any questions you might have regarding the cover. They provide FAQs and of course give the essential information needed for the consumer to make an informed decision regarding the suitability of a policy.

When taken out with your circumstances in mind loan payment protection insurance can provide you with a tax free income with which to continue meeting the repayments for your loan each month. Once you had been unable to work for a period of between 30 and 90 days the policy would start and the majority are backdated to day one. Cover would then continue providing peace of mind and security for between 12 and 24 months dependent on the terms of the provider.