Loan insurance can be a safety net but it has to be bought with your circumstances in mind.
Loan insurance has been in the spotlight for all the wrong reasons recently and one of the main problems with it is that for the majority of consumers it is hard to understand. Many people who have bought the cover don’t realise how much they are paying for it or what is involved in a policy, for instance the exclusions.
Loan insurance – sometimes known as ASU insurance due to the cover protecting a loss of income against accident, sickness or unemployment – will give you an income which is tax free once you have been out of work for a defined period of time which can be from the 31st day of being out of work or as long as the 90th day depending on where you choose to buy your cover. Loan insurance can work and give you an income which will ensure that you can make your loan repayments each and every month without the worry of where to find the money and stop you from getting into debt, providing you understand it.
However you do have to be aware of the exclusions in a policy and the most common are if you are retired, only in part time employment or if you suffer from an illness at the time of taking out the policy. These are just some of the reasons which means you could be ineligible to make a claim and it is essential that you check the small print out of every policy you are interested in buying.
In 2005 the Financial Services Authority began an investigation into the sector and handed out fines to several high street firms and although some changes for the better arose, many more changes still need making. During the latest investigation it is still clear that firms aren’t making the product any easier for consumers to understand and now the Chief Executives of the firms targeted will receive personal fines if the consumer’s best interests aren’t taken into account when selling loan insurance. Stick with a standalone provider and understand the product and loan cover will be an invaluable safety net.