Is Loan Payment Protection Insurance Worth The Cost? Find Out The Truth!

I believe by now you might have been asking yourself a lot of questions about Loan Payment Protection Insurance without getting an answer. Will I get peace of mind? What is the cost of the insurance? Is it okay to take the Loan Payment Protection Insurance? and a whole lot of other questions.

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What is Loan Payment Protection Insurance?
Loan Payment protection insurance (PPI), also known as credit insurance, credit protection insurance, or loan repayment insurance, according to Wikipedia, is an insurance product that enables consumers to ensure repayment of credit if the borrower dies, becomes ill or disabled, loses a job, or faces other circumstances that may prevent them from earning income to service the debt.

Nowadays, every time you apply for a loan you will most likely be offered payment protection insurance. If you are taking out a particularly large loan, the idea may seem very attractive.

These insurance policies will take over repayments on your loans in the event of losing your job or being involved in a medical emergency. But what are the true costs and benefits of this type of? Given that over a billion pounds are spent in Britain on this kind of insurance annually, it is worth asking yourself.

The Cost Of Insurance

The fact of the matter is that the lending industry has become more and more competitive in recent years. With interest rates getting lower and lower, lenders have sought to find out ways of increasing their returns.

One of the ways they have come up with is to offer various additional products that accompany the loan, such as payment protection insurance. What may come as a surprise is that payment protection can often cost as much as the loan interest repayments.

The payment protection repayments can, incredibly, effectively double the cost of the loan. With such startling consequences, it is imperative that consumers think carefully before opting for such options.

Peace of Mind

Many people will hold the view that as lives and jobs become more and more unstable, the peace of mind offered by such policies is worth the price. In some cases this is true, but not always.

Every insurance policy varies, but one thing remains the same, it is very difficult to get an insurance policy to pay out. You should look very carefully at the fine print of your policy and you will be amazed to find out what actually is covered, and what exclusions and exceptions apply.

For example, unemployment protection may only kick in after a certain period of unemployment, will not count if the unemployment was voluntary, and can require proof that the applicant has actively sought employment, and not turned any down, for the period since losing their job. This will give the insurance company literally dozens of reasons for refusing to pay out in most instances.

Don’t Accept The First Quote!

As well as these conditions, you should also shop around. The person you are borrowing from will always offer you a policy, but this unlikely to be the best policy available and a little shopping around will go a long way.

You will probably also find your self-better terms or terms that suit your needs more closely. Government standards are in place to make sure such policies are clear and in plain language, but complaints are still pouring into consumer protection groups regarding these policies.

The basic advice here is very careful if opting for expensive insurance policies. Make sure you understand the terms, and that you think they might be of benefit to you, and if you don’t want the policy, just say no.