Loan protection insurance came under fire in 2005 when the Financial Services Authority began an investigation into the sector following a super complaint made to the Office of Fair Trading by the Citizens Advice. It was revealed that many changes needed to be made to the way the product was sold and although some positive changes have been made a recent review by the Financial Services Authority has revealed that firms are still not making the product easy for the consumer to understand and is still being sold incorrectly.
Loan protection insurance can give you a tax free income each month if you become out of and unable to work due to suffering from an accident, long term sickness or through unemployment such as redundancy. After you had been out of work for a set period of time which can be anywhere between one to three months’ after the event, the insurance would provide you a tax free income for up to 12 months and with some policies for up to 24 months.
Do note that there can be exclusions which could mean that the product isn’t suitable for all circumstances so it is essential that these are pointed out at the time of buying. Some typical reasons include being of retirement age, self-employed, only in part time work or if you have an ongoing illness at the time of taking out the policy.
One of the many problems associated with the mis-selling of loan protection insurance and which led to several firms receiving fines from the Financial Services Authority early 2007 for was not making the product clear at the time of selling, poor selling techniques led to the product being mis-sold and people holding policies they couldn’t claim against. The majority of policies are bought alongside the loan at the time the loan is taken out with the high street lender but buying the cover this way can add hundreds more onto the cost than it needs too. Loan protection insurance can be bought independently of the loan and this is the best way to make huge savings on the premiums for what could be essential cover and give great peace of mind.
The standalone specialist provider of loan protection insurance will always make sure that the consumer has access to the vital information and key facts that is needed to be able to make an informed decision regarding the products suitability. One of the biggest changes for the better is to come in March 2008 with the introduction of comparison charts, comparison charts will make purchasing the correct product easier for consumers as they will answer a series of questions which will then lead the to the correct payment protection product. Along with this the charts will show how much in total the cover will cost, point out the exclusions within them and help the consumer to get the best deal.
It is important to remember that it isn’t the product itself that is to blame for the problems surrounding payment protection but those who have poor selling techniques such as the high street lenders. A standalone specialist will know their products inside out and as such be able to give you the essential advice needed for you to make the right choice regarding the suitability of loan protection insurance.
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