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.