In 2005 the Office of Fair Trading received a super complaint from the Citizens Advice. The complaint related to mis-selling of payment protection products with some firms offering cover that consumers could not claim against for huge premiums. While loan protection can be a lifeline to those who are eligible to take out a policy there are exclusions which mean it is not suitable for everyone.



While the Office of Fair Trading investigated, the Financial Services Authority (FSA) did also. The FSA handed out fines to several firms and then referred the sector to the Competition Commission. They are currently conducting an in-depth review of the sector and while some changes have been seen it was recently revealed that the FSA investigated over 4,000 cases in 2007.

While recommendations had been laid down since the early days of the investigations, mis-selling of loan protection and related products has doubled. There are currently around 20m payment protection policies in the UK and it is thought that around half of these could have been mis-sold which is a very worrying thought indeed. There has been some improvements, however some firms are still carrying on in their old ways and have made very little progress in improving their selling techniques. It is these sloppy sales practices which have given payment protection products a bad name.

It is also the lack of information given at the time of selling the policy that has caused the majority of problems. There are exclusions which are seen frequently in the majority of loan protection insurance policies, yet in many cases these were not highlighted to the customer. Being of retirement age, self-employed, suffering a pre-existing medical condition or working on a part time basis could mean you would be ineligible to claim. Providers can add in exclusions of their own so you do have to check the terms and conditions of a policy thoroughly before buying the loan insurance policy.

Choosing to purchase a loan insurance policy from a standalone provider is often the safest way to buy cover. An ethical independent provider will ensure you have the information needed to determine the suitability of a policy. This means that if you take their advice and take the time to understand the product it can work in the way it was designed to work.

Loan protection can give you the income once you have been unable to work due to ongoing illness, accident or unforeseen redundancy for between 30 and 90 days. Once cover has commenced it would continue to give you a monthly tax free sum of money to allow you to continue meeting your loan repayments. Having this income allows you concentrate on getting well, or getting a new job, without added stress.

Always make sure that you read the terms and conditions thoroughly of any loan protection you are considering and make good use of the free advice that a specialist in payment protection offers. There is more to consider when getting quality payment protection than just the premiums as we have discussed.