The importance of loan insurance
You may not have considered the importance of loan insurance. However, have you considered what would happen if you lost your job unexpectedly or you were off work for an extended period of time on a reduced sick pay wage? How would you cope financially?
With bills to service as well as day to day living costs, it may well be a financial struggle. Things like your monthly loan repayments may well be put to the bottom of the pile as you meet your other more pressing financial commitments, such as your mortgage or rent. This could mean that you fall in to arrears with your loan repayments, accruing interest plus possible late or missed payments fees, making your debt even larger, as well as potentially damaging your credit rating.
However, if you have a loan insurance policy, some of the financial strain often associated with these circumstances will typically be removed, and you can feel assured that most or all of your monthly loan repayments will be met, for a pre-agreed period of time.
How can loan cover help you?
Loan payment protection insurance (which is another name for this cover) is designed to provide you with a monthly amount that will help you service all or part of your loan debt, depending on how much cover you choose to take out and the provider’s own policy limits.
Should you fall victim to involuntary redundancy or become unable to work for a prolonged period of time due to illness or accident, then the policy will typically kick in and provide a tax free monthly amount that you can use towards meeting your monthly loan repayments.
How long will I receive the payments for?
Policy features and benefits do vary among depending on who you buy your loan payment protection insurance cover from, but a typical policy will pay out for up to 12 months – or when you get back to work, whichever event happens first.
Some loan cover policies will pay out for up to 24 months, and may typically attract a higher premium.
How much can I claim every month?
Once the policy starts to pay out benefits (which can be anywhere from 30, 60 or 90 days after the first day of unemployment or incapacity depending on the policy terms and conditions), you can usually claim up to 50% of your gross earned income or up to £1,500. This, again, differs among providers, so do make sure that you choose the most suitable policy for you.
How much does the loan insurance cost?
The cost of loan cover can vary quite dramatically, so it makes sense to shop around for your loan payment protection insurance cover to ensure that you get the policy that offers you the right cover at a price that suits your budget.
Protection insurance may be offered by your loan provider at the time that you take out the borrowing. However, you are not usually obliged to take their cover (unless by doing so gets you special rates of interest and therefore forms part of your agreement with them). And by not taking their cover and shopping around among the standalone providers of loan insurance, such as those found online, you may often find yourself a better deal.
So, if you want peace of mind that you will be able to continue servicing your loan debts no matter what life throws at you, then why not get a quote for loan insurance and see just how affordable it can be?
