If you borrow by taking out a loan or credit cards then you have to be able to continue repaying each month. If you cannot then you are going to get into debt and the lender might take steps such as taking you to court. At the very least you will see your credit rating decline. One way of ensuring that you are able to continue repaying if you should lose your income is by taking out loan payment protection. A policy would payout for a loss of income due to unemployment by such as redundancy or if you are unfit for work after becoming ill or suffering from an accident.
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You can have loan payment cover added onto the borrowing at the time of taking it out. However this is usually the dearest option and you can get protection for a lot cheaper. High street lenders have been known to calculate the cost of loan protection into the entire loan and then add interest on top of this. This means that in some cases borrowings can almost double.
Those who specialise in offering loan cover will take into account how old you are and the amount that you wish to cover each month, providers will allow you to insure up to a certain amount. The amount that you protect will be what you receive if and when you need to put in a claim.
All specialist providers will payout after a certain amount of time of being unemployed or of being incapacitated. When and for how long any cover you are considering will payout can be found in the small print of the conditions, you can also find out what exclusions have to be met for the product to be suitable for your circumstances.
Usually a policy will begin to provide benefit between 30 and 90 days with some providers offering to backdate your benefit to the very first day of you losing your job or of being unfit to work. Upon commencement of payout you would receive benefit each month for a certain length of time and then the policy expires. Some providers offer 12 monthly payments while others could offer 24 months protection.
Faith in loan payment protection has dropped since the investigation by the Office of Fair Trading and the Financial Services Authority started in 2005. As a result several well known high street names were handed fines and it was brought to light that policies has been sold to those who could not hope to claim against the protection they had bought. There are exclusions to be found in all policies and so you do have to check them against your circumstances before taking the cover. Some providers will add in more exclusions than others so it is essential to compare the conditions before taking out the policy. Loan protection can and does work providing you have checked them before buying and standalone providers always provide the information for you to be able to do so.
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