At some time we all take advantage of credit cards as a way of borrowing. Whether we use them on a regular basis and just keep adding to them each week for bills such as groceries, or whether we use them to make large purchases. While we are working this poses no problem we simply pay the credit card bill when it is due. The same goes if we take out a loan; we repay it through monthly instalments. However problems can arise if we lose our monthly income. Suddenly being without an income can make life extremely difficult. Loan payment protection insurance can cover your outgoings in case of unemployment or incapacity so that you are able to maintain those repayments each month.
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A policy can be taken out for a fixed premium each month with a specialist offering payment protection and this is the cheapest way to cover your outgoings. When taking on the credit card or going for a loan you will probably be asked by the lender if you want to take out protection. In the majority of cases this is not the cheapest way to protect your borrowings. High street lenders make around £4 billion a year in profits from the sales of payment protection simply by adding in it with the borrowing, in some cases lenders with work out how much it would cost to cover your loan throughout the term of the loan and then add in cover. This means that you not only pay interest on the amount you borrow, but also on the protection itself.
A specialist in loan payment protection insurance will on the other hand base your premium on your age and the amount of your payment that you wish to protect. Lenders will allow you to protect up to a certain amount each month and this is the sum you will receive if you need to claim. You do have to be unemployed or incapacitated for a certain amount of time before the provider will begin to payout. Usually this is around 30 or 90 days. However some providers will make sure you do not lose out because they will backdate the policy to the first day of you coming out of work due to accident or sickness or of being made unemployed. Your cover would then run for a period of between 12 and 24 months, providing a tax-free income each month before ceasing.
Shopping around and comparing the premiums is essential if you are to get the cheapest policy. You also have to check the terms and conditions of the cover before deciding which policy to go for as they all differ. Payment protection has in the past been a cause for concern and several well known names on the high street were handed out fines for mis-selling policies. However it has to be remembered that when taken out with your circumstances in mind loan payment protection insurance can be a very valuable product to have in your corner, providing you have checked the small print and ensured suitability.
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