Insurance For Loans - Are You Paying Too Much?

When you are discussing insurance for loans, there’s one thing you have to keep in mind.   The person selling you the insurance has no interest in keeping your costs down.  The more you pay, the better for them!  In actual fact, the majority of people end up paying far more than they need to for their loan insurance.

So what can you do to make sure you don’t pay too much?  Here are some suggestions.

1. First and foremost, remember that there is no need to purchase your insurance from the provider of the loan.  In most cases, you are better advised to look for a free-standing PPI (payment protection insurance) – an insurance broker can advise you about buying these.  You can usually use just one of these to cover all your loans and credit agreements, so you don’t have to take out a separate policy for each one.  What’s more, they are much less expensive.  A policy from the lender will usually be quoted at between £10 and £30 per £100 of the loan amount, whereas some PPIs are quoted at £1-£2 per £100.  A big difference!

2. There are various things you can cover for in a loan insurance policy.  Most people find that some of the contingencies covered in the policy are irrelevant to them, so they are actually wasting money.  Look for a good policy that will allow you to insure for only the elements that apply to you.  For example, if you are not employed, there is no point in paying for cover against being made redundant.

3. Be careful how you pay your premium.  Don’t pay it all as a lump sum up front, or you won’t get any of it back if you pay off the loan early.  And if you are buying the lender’s insurance, don’t let them roll it into the loan.  This means you will pay interest on the insurance as well as the loan!  Have the actual premium instalments added to your monthly statement or even better, buy a loan insurance policy from an independent provider.

Insurance for loans can be very beneficial – it can provide peace of mind, and greatly relieve the stress of unwelcome life events such as accidents, serious illness or redundancy.  However, it can also add considerably to the cost of the loan if you’re not careful.   Many people just pay up without realising that they are paying too much.  Don’t be like them – think what you could do with the extra cash!

Unsecured Credit - Avoiding repossession

The last thirteen years or so have been good times for the economy and consumers alike. Plenty of cheaply available credit has made us all feel richer than we are and as a result many of us have spent like crazy, providing fuel for an insatiable economy and housing market.

Well someone has cut the fuel pipe and the lifeblood of the economy has simply drained away; it’s clear now why this has happened. Let’s get the state of the economy in perspective, the last time that The Bank of England set the Base rate at 3%, rationing of food in Britain had just ended. Those were difficult times economically, our time could in fact be worse.

One thing is certain; the number of redundancies will grow very rapidly in the coming months.  What happens if we lose our income and are unable to meet our commitments?

Well if you had watched Panorama on the 10.11.2008, “can’t pay, wont pay”, you would have been surprised to learn that failure to pay can result in an order for sale of your property.

But how?

If you owe somebody money and they have a CCJ entered against you, which you do not satisfy, the lender can apply to the courts for a Warrant of Execution. The court bailiff will attempt to satisfy the judgement by seizing goods to the value of the judgment. If they are unable to do this, the “person” to whom the money is owed can apply to the courts for a Charging Order, charging your property with the debt; effectively turning an un-secured debt into a secured debt. If still you fail to pay, they can apply to the court for an order for sale.

Disturbing, and it would seem that more lenders in the current climate are employing heavy handed tactics, using hard nosed lawyers, that have partnership names like “ wolf” and “ grizzly”; gives you an indication of their likely approach

How can you ensure that your debts are paid, when you are not in a position to pay them?

An Accident, Sickness and Unemployment policy or ASU policy can help.

These policies are specifically designed pay a monthly benefit should you be made unemployed through no fault of your own, or you are incapacitated due to an accident or sickness.

In the event of a claim under an Accident, sickness and unemployment policy the monthly benefit will be paid directly to you, so you can prioritise its use as you feel fit. Normally payable for up to 12 months if needed, the benefit is tax free under current HMRC rules. An Accident, Sickness and Unemployment policy does exactly what it says in the literature, so read the Key facts document and policy conditions carefully.

If you have elected to include the Accident and Sickness insurance cover element, do make sure that you disclose all pre existing medical conditions. The rule is, if in doubt, disclose. They are actually not too expensive for the cover that they provide, but as always avoid the policies offered through the Bank’s. A good ASU policy can keep your life and your credit on an even keel, while you find a job or recover from illness.

How Do You Know If Your Loan Insurance Has Been Mis-sold?

Most of us have taken out some form of loan at some time.  This means that most of us have at least been offered loan insurance.  This is a policy to protect your payments if something happens to your income.   This seems a good idea and the policies are very popular.

However, recently it has become clear that a lot of loan insurance policies have actually been mis-sold.  In fact a lot of apparently reputable companies have been fined for bad practice in this respect.   It’s particularly tempting to mis-sell these policies as the commission is good, and most customers don’t like to say no. 

So how do you know if you have been mis-sold a loan insurance policy? And if you are thinking of taking one out, how do you recognise mis-selling?  Here are some examples of bad practice to look out for.

1. You are told that you have to have the loan insurance policy to get the loan.  This simply isn’t true.  You don’t have to have it at all, and if you do have it, it doesn’t need to be from the same provider.
2. Excessive pressure is used by a pushy sales person to bully you into taking the loan insurance.  They might suggest you are irresponsible if you don’t take it, or just make it impossible for you to leave without signing up.  This is bad sales practice and can constitute mis-selling.
3. You are sold loan insurance that is largely or totally irrelevant to your needs.  For instance, a policy that insures against being unable to repay the loan because of redundancy, is irrelevant for you if you are self-employed, retired, or in employment with a no-redundancy agreement, such as local government.
4. You are not given the opportunity to look at the small print before committing yourself to the policy.  You could find after signing up that a medical condition from which you suffer is explicitly excluded.
5. One of the most blatant examples of mis-selling: the policy is actually included in the loan without asking you, and you don’t find out until it’s too late!

If you have already taken out loan insurance and any of these apply to you, you could qualify for compensation.  Contact your seller or talk to a broker to find out what to do.  If you are likely to purchase a policy in the near future, be forewarned and don’t let yourself be a victim.  Loan insurance can be a valuable product that can give you peace of mind and come to your rescue when things get difficult.  It’s sad that a few people chasing commissions have given it a bad name!

Personal Loan Insurance - Simple Rules To Protect Yourself

If you have taken out any form of loan or credit the chances are you will have been offered personal loan insurance.  The type of insurance is similar whether it’s a mortgage or a bank loan, a store card or a new car.

The insurance may be similar but the way in which it is offered varies greatly from one provider to another.

• Some providers will give you the impression that taking the insurance is a condition of getting the loan.
• Others will give you a very hard sell, making you feel it’s impossible to say no.
• Some will simply say, “Would you like to protect your monthly payments?” – to which, of course you will say “Yes”.  But there’s no attempt to look at your specific circumstances to see if the policy actually will protect you.
• There are some providers who will actually add the insurance policy to the loan without telling you!  You may find this incredible, but it does happen quite frequently.  You don’t actually realise you have paid for the insurance until you receive the paperwork a couple of weeks later – by which time, cancelling can be quite difficult.
• There are of course those who will politely ask you if you would like personal loan insurance and won’t push you either way.  But as there is good commission on these policies, such people are in a minority!

Of course, it can be quite important to have a personal loan insurance policy in place.  If you find yourself unable to make your payments, it can be disastrous.  At best it can cause you severe stress and can adversely affect your credit rating.  At worst you can lose your belongings or even your house.

So insurance can be important.  But it’s quite possible to find yourself paying more than you need, or even end up with a policy that is of little or no use to you.  So here are some rules to follow to help you protect yourself against unnecessary expense.

• Don’t take any notice of anyone who tells you that you can’t have the loan without taking out the insurance.  You can take the loan with no insurance, or you can take the insurance from a different provider.
• If you decide you do need a personal loan insurance policy, you are usually better taking out a standalone policy from an independent provider.  These are usually much cheaper, and you can adapt the loan to your specific needs.  Ask your independent broker how to find one.
• If you do take out a policy, don’t pay with a single lump-sum premium up front.  This can make it hard to get any of your premium back if you pay off the loan early.  On the other hand, if you are taking the lender’s own insurance, make sure they don’t roll the premium payment into the cost of the loan.  This would mean you were paying extra interest throughout the term of the loan.  What you want is for the premium instalments to be added to the monthly statement.
• Always remember that the person selling you the insurance is not concerned with your personal circumstances.  The onus is on you to check whether the policy is suitable for your needs.  For instance, if you are self-employed or retired, a policy insuring against redundancy would be a waste of money.

A personal loan insurance policy that is suited to your needs and circumstances can be of great benefit to you if the worst happens.  If you follow these simple rules, you’ll enjoy protection and won’t pay too much for the privilege!

Loan Payment Insurance - Pros and Cons

When you take out any kind of loan or credit agreement, you are almost certain to be offered loan insurance.  This is a policy that is supposed to protect you in case anything happens to prevent you making repayments on your loan.  You can have one whether it’s a mortgage, a bank loan, a credit arrangement for buying a car, a store card, or any other kind of credit. 

Loan insurance is very popular and thousands of policies are sold every year.  So why do so many people buy them? 

The person selling you one of these policies will almost certainly mention “peace of mind”, and this is certainly an important reason for buying a policy.  Obviously if you’re taking on a major financial commitment, the thought of being unable to meet the payments would be a nightmare.  It could mean the bailiffs seizing your belongings, a seriously impaired credit rating, or at the very worst losing your home.  So the idea is that, with loan payment insurance, this is no longer something you have to worry about.

In addition, of course, most of us like to feel we are being prudent and thorough.  We all like to think we have taken every possible precaution against things going wrong.  If you refused to take out loan payment insurance, you might well feel guilty about failing to protect yourself and your family. 

So taking out loan payment insurance can be a good idea.  If you did find yourself made redundant, or unable to work because of an accident, this would be a highly stressful situation.  Knowing that your loan payments could continue would greatly reduce the stress.

However, there are also some downsides to loan payment insurance, so you need to consider these before you decide.

• A loan payment insurance policy that is linked to the loan itself will be “one size fits all”.  It wouldn’t be tailored to your actual situation so it might not be suitable for you.

• A loan payment insurance policy only protects against very specific circumstances.  If you buy a policy thinking it will cover you whatever happens, you could be in for a nasty shock.  For instance, it could claim to cover you against “illness”, but in the small print there could be a list of conditions that are not covered, including some quite common ones.  The small print also usually contains a list of exclusions, some of which might apply to you – for instance, those in casual or seasonal employment.  Sadly, the people selling the policies don’t often encourage you to read the small print before buying.

• A policy added to the loan can add significantly to the cost of the loan.  You could potentially find yourself paying out considerably more each month, without receiving any real benefit.

A loan payment insurance policy may well be very worthwhile for you.  But if you are thinking of taking one out, don’t take anything for granted.  Read the small print carefully and find out if the policy is suitable for you. You will find that a loan insurance policy that is independent of the loan itself is much more flexible. If not, talk to a broker and find one that is.

Why buy loan insurance?

Why should you buy loan insurance?

If you apply for a personal loan, hire purchase or finance agreement you are more than likely to be offered insurance to cover the loan repayments. This loan insurance will cover you against accident, sickness and unemployment but may also include death or critical illness.

The loan insurance policies offered by finance and loan companies are very expensive as you are a captive market. Very few people who apply for a loan will bother to see if the insurance cover is available at a cheaper price elsewhere. The loan company want you to have the cover as the earn a nice commission for each loan policy sold.

Buying loan insurance does make sense. You are protecting the personal loan payments in case you are unable to work. However, it makes even more sense to spend some time researching loan insurance to see what independent policies are available. Invariably, these will be much cheaper than the policies offered with the loan or finance package.

We offer loan insurance from British Insurance Limited who provide good quality insurance cover at reasonable prices. For more information please visit our loan insurance page http://www.enhancedwealth.co.uk/loaninsurance.htm

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