Taking out a loan is a serious matter. You spend a lot of time looking and comparing the correct loan from the lender who offers the most flexible repayment terms and rates, and the time taken to make the decision to take out a loan should not be underestimated. This is even more of a reason to make sure that you use the same diligence, and take the same time, to compare your loan protection policy.
Once you know the monthly cost of your loan payment and how long the term of repayment is, you can start to compare loan protection policies that match your requirements and budget.
You have taken on a new commitment and want to make sure that you protect that loan, but equally, you want to ensure that it doesn't add a greater expense to your monthly outgoings. By understanding and comparing a variety of loan protection policies with the same level of diligence, you will not only be able to find the best price, but also the best policy based on the added benefits and conditions the policy offers you. This guide will tell you everything you need to get started and secure the right policy for you.
Why loan protection insurance?
First, you should ask yourself why you took the loan in the first place. Was it to purchase a new car? Pay for some home improvements or even consolidate some debt you may have taken on, for example your credit cards?
There are far too many reasons as to why you would take out a loan, however there is one thing that remains constant… The loan will always need to be repaid. Month in and month out, until the term you have chosen ends. If you were to lose your regular income due to accident, sickness or unemployment, would you be able to keep up with your loan repayments, along with your other monthly outgoings? Missing even one repayment can affect your credit rating, or even worse, lead to your new car or purchase to become repossessed. All too quickly you can find yourself in a situation that spirals out of control, leading to further stress and financial difficulties.
Having a loan protection insurance plan in place protects you from this, and ensures your monthly commitments are covered if the worse was to happen. It provides an invaluable peace of mind, so you can relax in the knowledge that your loan repayments are protected from the unexpected.
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What is loan protection insurance?
Loan insurance is an insurance policy that safeguards the monthly payments of any loan that you have taken out. The policy provides you the peace of mind that should anything happen to your ability to work. For example, if you are made redundant, have an accident, or take off work due to illness, the policy will pay the monthly cost of your loan until you are able to return to work.
Most loan protection policies will only cover your monthly loan payment and nothing else, as this helps keep the cost down and allows you to maintain your loan payments should the need arise. Usually the loan protection policy will cover you for a maximum of 12 months for unemployment, however some accident and sickness loan protection policies will cover for longer periods. This is dependent on the length of time you have taken your loan for.
It really is a sensible option for anyone taking a loan. Unfortunately, due to changes in the consumer credit act, loan companies are now unable to offer you loan protection at point of taking out your loan, and hence you will need to look independently for your own protection policy.
Unfortunately, this has left a lot of individuals in the UK without the correct protection in place, as they are not made aware of their options at the time of taking out a loan. Do not be one of the many that have left themselves exposed financially, and make sure that the extra commitment you have taken, for whatever the reason, is covered fully by an accident, sickness and unemployment loan protection policy.
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What does loan protection insurance cover?
A loan protection policy covers you for three major main issues that could leave you in financial detriment:
If you were to injure yourself (either at work, home or anywhere else) and you are signed off work for a period of time, you would be eligible to make a claim. Your monthly claim pay-out, also known as your monthly benefit amount, will replace your loss of salary and allow you to maintain your loan repayments.
If you become ill, and need to have surgery or extensive treatment, this could lead to you taking a substantial amount of time off work. Unexpected sickness can cause a tremendous amount of stress in itself, without the added financial concern that comes with loss of income. Your loan protection policy will ensure that your repayments continue to be met until you are well enough to return to work.
Finally, you could be made redundant due to any reason, such as bankruptcy, administration, mergers, acquisitions or cutbacks, and you would be eligible to make a claim. As long as you haven't left your job of your own free will, or been sacked due to disciplinary issues, you will be able to receive your monthly benefit amount to cover your loss of earnings until you return to work or your term length is finished.
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How does loan protection insurance work?
Loan protection insurance works by providing you a monthly benefit amount to cover your loan repayment if you were to lose your income due to accident, sickness or unemployment, depending on your policy.
First, you need to choose how much cover you need want. This is usually the exact amount of your loan payment, let's say £300.00 as an example. Once you have chosen the amount you will need to choose your waiting period, this is usually 30 days, 60 days or sometimes 90 days. The waiting period is how long you have to wait until the insurer will start paying the money to you. The longer the waiting period the cheaper the policy, the shorter the waiting period the dearer the policy.
You then get the opportunity to choose the term of the policy, it could be 12 months, 24 months 26 months, again this is usually linked to how long you have taken out the loan.
Once you have chosen this, you can continue to make sure you are eligible to make a claim, should the need arise. You can do this by answering the eligibility questions of the policy, and if you answer these correctly you will be able to proceed. Unfortunately if you do not, then you will not be able to continue.
Finally, you will need to carefully read through the policy wordings to make sure that you understand the terms and conditions, and most importantly, the terms and conditions you will need to meet to make a claim.
It is extremely important that you completely understand exactly what loan protection policy you have purchased. We have a team of trained specialists that will be happy to answer any of your questions, or do the hard work for you. Simply call 0330 330 9465 or email firstname.lastname@example.org.
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Do I need loan protection insurance?
If you have taken a loan out then it is the most sensible option, as why should you leave yourself exposed financially by not having the correct financial protection or umbrella in place? The whole reason to take out a loan is because you do not have the cashflow to pay for things immediately, and hence rather than saving, you can purchase immediately with the help of a loan.
Whatever the reason for your loan, by taking out a loan insurance policy you are safeguarding yourself financially, and protecting yourself from the unexpected. Not taking loan protection insurance is a risk to yourself and your family should you have one, as generally it is your family the comes to the rescue when things go wrong finally. If you do not have that luxury, then there is even more of a reason to obtain protection.
Why increase your debt with further borrowing when for a small monthly cost then you can obtain the correct protection in place to cover those financial shortfalls.
Hence the reason why I say that if you have taken a loan then there is no question that you should have a loan protection policy.
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Types of loan protection insurance
There are many different types of loan protection policies available, you can find most online, however essentially, they all cover the same thing.
They cover the monthly loan repayment for any unforeseen loss of income.
What can differ is the level of cover that each policy offers you, this obviously reflects the price but can give you some added extra benefits. Some policies will provide free legal protection, which can help in consumer disputes or identity theft, even employment tribunals can be covered with this policy.
Also, back to work support could be another benefit, this is offered when you may need help returning to the job market, CV writing, interview techniques and general presentation skills.
Some policies may include hospitalisation benefit which covers you should you end up in hospital or waiver of premium in claim.
Again, these are all added benefits that can be found within different types of loan protection policies and should help you decide which policy best suits your personal circumstances.
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Am I eligible for loan protection insurance?
There are of course certain terms and conditions that you will need to meet to be able to purchase loan protection insurance. The insurer cannot offer it to everyone, however the fact that you have been given a loan would suggest to most people would be eligible.
Some of the eligibility questions are:
Do you permanently reside in the UK?
Have you been in 6 months of continuous permanent employment?
Are you aware of any redundancies, restructure, reorganisation or financial contractual threats within the company you work within?
Are you subject to any disciplinary action by your employer, or have you been made aware of impending unemployment?
These are the standard eligibility questions for any loan protection policy, however there will be more detail. These questions should always be either read or discussed before purchasing. There is no point purchasing a product that you cannot claim on when it is needed. If you are unsure then do some more research or call our specialist protection consultants to help you understand your own individual eligibility.
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How do I compare loan protection insurance?
To start comparing loan protection insurance, all you need to is fill in this short form which will generate a selection of quotes based on your personal requirements.
First of all you should start with the basic main points of any loan protection policy, the amount of cover you need monthly, the initial exclusion period of any unemployment policy, the waiting period and finally length of time the policy should pay out for.
Once you have these basic principles then you can obtain some quotes, do not forget that these products are linked to your age, unfortunately the older that you are the higher the cost.
Once you have the costs you can go to the next level of detail which is to look at all the other benefits and terms and conditions one policy offers and others do not. This will mean some detailed reviews of the policy wordings to really get a full comparison.
It will take time, but by completing your research and comparing a variety of quotes, you will be able to purchase the correct, most comprehensive and competitive loan protection policy that is available. If you feel you need any help or guidance, simply call our team of trained specialists on 0330 330 9465.
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