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!