Personal Loans & Protective Insurance

P8RSON

I'm not sure if this has been covered here in MoneySavingExpert and if so I apologise in advance.
If not I hope this may make some interesting reading to some...........

Two days ago on the 26th July 2006 I rang Sainsbury Bank to enquire about having my current personal loan restructured to include a Natwest Loan I had taken out last year.

By using the Sainsburys Bank I could reduce the interest level and my overall payments, plus leave myself with a bit of cash to spare to cover existing spendings on my credit card.

Anyway, I'm not here to discuss the strengths and pitfalls of Sainsburys Bank, indeed the following tip would apply to any form of Bank borrowing.

So, whilst obtaining what my monthly repayments would be, I was asked if I wanted protection to cover in the event of death or loss of work.
This is when I received a shock and went off in search of an alternative answer:-

Sainsburys Bank have at present a very good 6.1% plan with no payments for the first three months if you so wish.
With this plan I asked for a personal loan for a sum of £10,000 payable over 60 months.
I was quoted two figures..
1. With Protection.........£258.71
2. Without Protection....£195.18

Now look at the difference here and you can see that the protection is costing £63.53 per month.
Times that over the period of the loan (x60) and you soon see you pay a protection premium of £3811.80

Totally shocked I decided to go in search of an alternative for protection and here is what I pleasently found.....

A quick telephone call to MORE TH>N (More Than) and after giving them my age 53, smoker, 5yr cover period, £10,000 of personal insurance to cover in the event of death or unable to work, I was then given my monthly repayment.....

Company = Legal & General
Type = Family Protection Plan
Cover = £10,000
Period = 60months.

Cost = £5.46

Yes.... £5.46

So with the Sainsburys Banks Protection costing £63.53 per month, it doesn't take much to work out there is a MAJOR savings to be found here.

Sainsbury Bank total protection payment........ £3811.80
Legal & General Family Protection Plan.............£327.60

Your comments are welcome......

kingkano

The family protection plan doesnt sound like it includes unemployment? ie redundancy, being sacked, etc. The sainsbury insurance probably does. But the 2 sites you want - to compare like for like - are payprotect and paymentcare. The premium will be much much cheaper. You will probably find you can pay less to these companies to cover ALL your outgoings... not just the loan repayment that sainsbury cover.

HTH

P8RSON

Regardless to whoever is cheaper, the underlying point is why oh why do banks or similar loan providers have the ability to charge so much for so little in cover..

It's simply ludicrous the amount the charge and get away with.
Obviously it doesn't cost them this amount to cover the individual, so why should they be allowed to get away with making extra and where exactly does this extra go?

kingkano

the extra is 1)their profit... massive markup. In fact northern rock for example sell the same company (pinnacle) as payprotect. for about 4x the price lol.

2) they charge you for the whole of the insurance cover up front, ie 3yrs worth at once, lend you that money, then charge you interest on top!!

Hence why Martins articles are strongly against PPI from banks.... even PPI in general.

Astaroth

P8RSON wrote:

Why should they be allowed to get away with making extra and where exactly does this extra go?

Not sure what you think they are providing here.... banks sell insurance on their loans as it makes them profit - the same way that HMV sells DVDs because it makes them profit. In margin terms the sales of CDs/ DVDs have a much higher sale cost compared to manufacture cost -v- any form of insurance.

Why are their prices so high? Because people are willing to pay them. If your job was to sell a product and you knew you could sell it for twice as much wouldnt you? Or would you take home less than 1/2 your wage so that you felt good for not "over" charging people? - of cause not only do you take home less than 1/2 your wage but you also run the risk of being sacked for not doing a good job