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Loan Payment Protection Insurance – Worth The Cost?
By: Joseph Kenny
Nowadays, every time you apply for a loan you will most likely be offered
payment protection insurance. If you are taking out a particularly large loan,
the idea may seem very attractive. These insurance policies will take over
repayments on your loans in the event of losing your job or being involved in a
medical emergency. But what are the true costs and benefits of this type of
insurance? Given that over a billion pounds is spent in Britain on this kind of
insurance annually, it is worth asking yourself.
The Cost Of Insurance
The fact of the matter is that the lending industry has become more and more
competitive in recent years. With interest rates getting lower and lower,
lenders have sought to find out ways of increasing their returns. One of the
ways they have come up with is to offer various additional products that
accompany the loan, such as payment protection insurance. What may come as a
surprise is that payment protection can often cost as much as the loan interest
repayments. The payment protection repayments can, incredibly, effectively
double the cost of the loan. With such startling consequences, it is imperative
that consumers think carefully before opting for such options.
Peace of Mind?
Many people will hold the view that as lives and jobs become more and more
unstable, the peace of mind offered by such policies are worth the price. In
some cases this is true, but not always. Every insurance policy varies, but one
thing remains the same, it is very difficult to get an insurance policy to pay
out. You should look very carefully at the fine print of your policy and you
will be amazed to find out what actually is covered, and what exclusions and
exceptions apply.
For example, unemployment protection may only kick in after a certain period of
unemployment, will not count if the unemployment was voluntary, and can require
proof that the applicant has actively sought employment, and not turned any
down, for the period since losing their job. This will give the insurance
company literally dozens of reasons for refusing pay out in most instances.
Don’t Accept The First Quote!
As well as these conditions, you should also shop around. The person you are
borrowing from will always offer you a policy, but this unlikely to be the best
policy available and a little shopping around will go a long way. You will
probably also find your self better terms or terms that suit your needs more
closely. Government standards are in place to make sure such policies are clear
and in plain language, but complaints are still pouring into consumer protection
groups regarding these policies.
The basic advice here is be very careful if opting for expensive insurance
policies. Make sure you understand the terms, and that you think they might be
of benefit to you, and if you don’t want the policy, just say no.
About the Author:
Joseph Kenny writes for the loan comparison sites,
http://www.ukpersonalloanstore.co.uk and also
http://www.selectloans.co.uk. The latest loans are reviewed in detail
at the Loan Store.
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