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Cover your loan repayments, in the event that you lose your job, or if you’re unable to work due to accident or illness

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What is Loan Protection?

Otherwise known as payment protection insurance (PPI), this form of short-term loan protection has over the last few years caused many a headache and received a negative press for obvious reasons. The mis-selling of PPI has been a national news story, so why, we hear you ask does loan protection cover still exist?

Firstly, they are different products and secondly, if done correctly, it can be a useful insurance package for those that may need it when the unexpected can happen.

We will cover what Loan Protection cover is, the different forms of loan protection and what you need to specifically look out for when considering this form of loan protection cover.

Loan protection cover however is a flexible solution which provides monthly benefits paid directly to you – and isn’t tied to one specific product. What that ultimately means is you’re in charge of the money and so you get to decide how you want to spend it. From mortgage repayments to car finance or paying down any credit card debt for example.

Loan protection can be worth up to 70% of your gross earnings and are offered under two main types of loan protection cover;

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Find out more about Loan Protection and how it works:

Loan protection works by giving you peace of mind should you fall ill and be unable to work for a short or long period of time. It is estimated that long-term sickness leave will rise by 15% in UK businesses by 2030. So is it any wonder why loan protection cover is becoming a popular option amongst the working population?

Like other forms of insurance policies, you pay into a product where, should you end up having to use it, the cover you choose will be reflected in your monthly premiums. Some products will pay out upto 70% of your gross annual income – tax free – so choosing the right product is essential if cover is a concern you have.

Unlike PPI which would be associated with a singular product, loan protection cover means that your payout can be used for whatever you need it to cover; from your mortgage to car finance or reducing general debt.

This is all dependant on a variety of factors. These include:

  • Your current employment status
  • Your gross salary (annual)
  • How much you want to be covered for
  • Any personal details that may affect your likelihood of making a claim – illnesses in the family for example.

The saying, ‘expect the unexpected’ is not how we really want to be living our lives, but unfortunately, with loan protection cover this is precisely what that means. None of us expect to fall ill, have an accident or be made redundant from our jobs, but they are things that happen and not having some form of loan protection for a prolonged period of time can cause financial worries – for many individuals.

The simple question to ask is, “Do I have debts that I would struggle to pay if I didn’t have some form of cover?” If the answer is yes, it may be worth considering looking into some form or loan protection cover.

Before making any kind of loan protection purchase, you will want to make sure that the product is right for you – and that it covers you for your specific needs. Ask the question, “Do I really need cover for accident, sickness or unemployment?”

  • Do I need loan protection cover?
    Ask yourself throughout your research, and even when looking at providers is it something that you can do without? Do you have enough savings to help you out? Can relatives or possibly friends give you a short term loan? These would be the questions you would need to ask before committing to a product.
  • What is the deferred period?
    A lot of these covers will have a deferred period. This will vary with different providers but for many, you won’t be able to claim at the very start of your policy. Some policies will factor in a 30 day deferred period whilst others will be 180 days.
  • Consider standalone cover

There are some packages which are standalone loan protection covers which in general are cheaper than the lenders’ own insurance.

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