Loan insurance changes proposed
The Competition Commission has proposed changes to the way loan insurance is sold. The majority of loan insurance policies are sold with the finance package at point of sale. Consumers therefore have little opportunity to shop around for cheaper or better loan insurance cover.
They state that payment protection insurance (PPI) should not be offered to a customer within 14 days of being sold a loan product.
On the downside, this means that some consumers will be left without cover if they choose not to accept the separate offer of loan insurance.
However, it does mean that they do have time to look for an independent loan insurance policy that provides excellent cover at a competitive price. This will allow them to buy a much better loan insurance product and pay less for it.
With BT today announcing proposed redundancies of 10,000 and other companies also laying off staff, the issue of redundancy insurance is on many peoples minds.
Personal loan insurance can provide cover for accident, sickness and unemployment and is designed to make the repayments on a personal loan for upto 12 months. Redundancy insurance can be obtained with an income protection policy which covers just your income or a mortgage payment protection policy which covers your monthly mortgage payments.
Loan insurance delay proposed - BBC News
The BBC have an interesting article on proposed changes to the sale of loan insurance policies.
A crackdown on the sale of loan insurance has been proposed by the Competition Commission. The Commission said that the proposed 14-day window would allow customers to shop around for PPI (Payment Protection Insurance). This would be a good move and gives consumers the opportunity to shop around for better value loan insurance.
Read more here.
What is personal loan insurance?
Personal loan insurance is a form of accident, sickness and unemployment insurance.
Accident, sickness and unemployment (ASU) policies generally come in three different types:
The variations determine what the main aim of the policy is. With personal loan insurance, the main objective is to protect the loan repayments in the event of accident, sickness or redundancy. Should one of these events stop you from working then the loan insurance policy will payout the sum insured for up to 12 months. This should provide enough time for you to get back on your feet. At the end of the 12 months, or earlier if you return to work, the payments will stop.
Put simply, if your loan repayment is £250 per month, then this is the amount you need personal loan insurance for. The premiums for loan insurance are extremely competitive and much, much lower than policies provided by the loan companies themselves.
Providers of personal loans rely on the sales of loan insurance to produce a valuable stream of income. They do not have to provide a competitive policy and so the premiums are much higher than a personal loan insurance policy which is available from an independent source.
Getting the best loan insurance
How do you get the best loan insurance?
Generally speaking, the worst place to buy loan insurance from is the personal loan company. Whilst they might encourage you to take up their loan insurance cover it is likely to be very poor value for money.
Loan insurance policies provided by lenders are loaded with high amounts of commission, this can be 40-60% of the premiums that you pay! Unsurprisingly, the company will want you to buy their loan insurance, and the reason is very simple to see.
A much better option is to buy an independent personal loan insurance policy.
Independent providers of personal loan insurance need to provide loan insurance policies that:
- have competitive premiums
- have good quality cover
- are easy to understand
- are easy to apply for
This competition drives up the quality of the cover and drives down the premiums. These types of policy are great value for money and so much cheaper than loan insurance from your bank or finance company.
One added advantage of buying an independent personal loan insurance is that you are in control. You can decide to change the policy if you need to, or stop it when your loan is paid off.
