Deciding to take out a loan is a big decision and ensuring you can pay it back, is important to you and the company lending you money. An option available to you is loan protection insurance or payment protection insurance (PPI).
By offering short term protection, somewhere in the region of 12-24 months it is in place to help you keep up to date with your repayments in the case of illness or accident incapacitating you even paying off debts in the case of death. Risk of unemployment or financial crisis that affects how you pay off the loan is an element of everyone’s life. If you have no savings or alternative funds then loan protection insurance can offer you and your family peace of mind and keep you credit score the same.
Do I have to take out PPI with my loan? The loan company agent might make you think that but it is a choice. Not everyone needs to you might already have adequate cover:-
- If you are currently in a sick pay scheme you already have cover.
- You have a period of sick leave cover available from your employer.
- If you have a regular guaranteed income.
- You are in secure employment with little risk or redundancy.
It is important, as with any form of insurance, to understand the claims procedures and entitlements. Read the fine print, it is your responsibility not the agents, anything you don’t understand ask. If you are not careful you can find that you are not eligible for a claim as selling the policy does not require a lot of information to be asked. You could be buying a policy that you will not be eligible to make a claim on at a time when you need it. If any of the following applies your PPI policy might not cover you:-
- If you are under 18 and over 65 years of age
- Work less than 16hours per week.
- Work as a temporary worker and lose your job.
- Have an existing medical condition you are aware of.
- Are unable to work due to certain conditions, eg back problems.
- Aware that you might soon be unemployed.
- Work in your own or family business and its goes bust.
To summarize loan protection is not compulsory, the premiums can add significantly to your monthly outgoings with no return. The terms and conditions can be quite confusing and need to be clearly understood before you purchase as you could find yourself not qualified to claim.
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