Taking out a seperate insurance policy to cover loan payments

tomsaxton

in the event of accident, illness or unemployment.

I take it that it's a far better option to take out a seperate policy rather than take the loan provider's ppi? I've just done a quick search on moneysupermarket and i'm getting quotes of about £6 to protect my £140 a month loan payments. Does this sound right? Kind of expected to be paying more to be honest.

tomsaxton

To clarify, that is income insurance rather than a ppi so the balance of the loan won't be paid, just the payments for 12 months. Should I perhaps be looking at a policy that covers the balance of the loan?

Astaroth

It all depends on how risk adverse you are. Personally I have never taken any form of PPI out (other than the long term sickness insurance I get as standard from work) where as the misses gets the top level of PPI cover with every credit product she has.

Rafter

Tom,

You expected to pay more because banks make about 75% profit out of these policies because the amount of claims is so low.

Most policies will only pay out for 12 months.

You must remember that this is an unsecured loan.

If you cannot pay it back because you are long term sick or unemployed your house won't be at risk and you can always negotiate with the lender to make only the payments you can afford given your changed circumstances.

Astaroth, top up how much your wife is paying and how much the same cover would cost buying direct. The banks must love her too!

R.

tomsaxton

thanks, that's really helpful. I think I'll take out the £6 a month policy

Astaroth

Rafter wrote:

Astaroth, top up how much your wife is paying and how much the same cover would cost buying direct. The banks must love her too!

Given that she works for the bank and used to work in their PPI claims department (now works in the counter fraud department looking at PPI and other insurance fraud) she does feel that she gets the best value for money out of them.

Of cause it has given her the advantage of knowing the different policies on offer inside out and so knows which ones dont have a pre-existing or max 12 clause etc (which from a company perspective is scary that such policies exist)

debster369

My advice would be to look into the policies available in more detail. Income protection is fab but often you need to be off work for 90 days before you can claim whereas PPI can be as little as 15 days and often covers you for more circumstances, but for this reason is more expensive. As Astaroth said, it depends on your risk factor.

Incidentally, although it's an unsecured loan, if you default on it the bank may not be able to re-posess it but the can force the sale of it, so it's wise to have something in place.