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Loan Protection Insurance is a kind of pay assurance protection intended to cover your credit reimbursements in the event that you lose your employment or find yourself unfit to work because of a mishap or disease. It can cover different sorts of obligations, including vehicle finance, Visas, and home loans and the sky is the limit from there.

Most people use credit in one form or another. Whether it’s credit cards, a loan, or a mortgage, it’s important to know how your credit history will affect you. This blog looks at how credit or loan insurance can help you out.

Credit or loan insurance provides coverage that may help you pay off your loan or make your loan or credit card payments in the event of job loss, disability, death, or emergency. Learn how it works, how you can apply, and what to look for with the help of a credit insurance company.

Credit or loan insurance provides coverage that may help you pay off your loan or make your loan or credit card payments in the event of job loss, disability or death of an insured person. This blog looks at different types of insurance offered by lenders and how you can use it to pay off your debt.

With job losses and other financial challenges, it is good for both individuals and businesses to have credit or loan insurance. This form of protection can help you pay off your loan or make your loan or credit card payments in the event of job loss. You can find out more about this type of insurance online or you can attend a seminar. Here is some information about a seminar held on April 25th at the Austin Marriott South.

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What is Loan Protection Insurance?

Loan Protection Insurance takes the financial and emotional stress out of paying off your home, with cover to help you meet your loan obligations in the case of a serious illness, involuntary unemployment, terminal illness or death.

Unlike payment protection insurance (PPI) which is tied to a specific loan or credit repayment, loan protection insurance is flexible, providing monthly benefits that are paid directly to you. This means you can choose how you spend it, from covering mortgage repayments to paying off debt on credit cards.

The amount of coverage on your loan protection insurance can be as much as 70% of your gross earnings and can be tailored to suit your specific needs.

There are two main types of loan protection insurance: short-term and long-term policies.

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Short-term loan protection policies:

These payout for a maximum of 12 months and provide financial support following involuntary redundancy, an accident or an illness. As they only last a year, this type of policy is more affordable than long-term loan protection insurance, providing flexible and manageable loan cover for a wide range of scenarios.

Long-term loan protection policies:

These provide more substantial cover than short-term loan protection policies, with a benefit period that can last up until retirement age. While these policies are designed to cover you against accident and sickness, long-term loan protection policies do not cover unemployment as a result of involuntary redundancy.

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How does loan protection insurance work?

Long-term sickness leave is affecting an increasing number of people, with the cost to UK businesses expected to rise by 15% by 2030.[1]

If you were unlucky enough to be one of those people, loan protection insurance would help to offset financial uncertainty by paying you a tax-free monthly benefit, acting as an income replacement while you are out of work.

You can choose how much you receive as a monthly benefit, usually with a limit of up to up to 70% of your gross annual income. The cover you choose will be reflected in your monthly premiums, so it’s important to consider how much you would actually need in the case of a claim. ActiveQuote’s loan protection insurance comparison tool can help you to identify the right policy for you.

Do I need loan protection insurance?

While none of us like to imagine ourselves becoming too ill or injured to work, the reality is that sickness and accidents can happen at any time. Depending on your situation, this could leave you unable to work for a prolonged period of time, jeopardizing your financial commitments.

Likewise, involuntary redundancy is not always predictable and results in financial strain for many people. Although redundancy levels have dropped since 2014, the UK job market still faces uncertainty; around 97,000 people were made redundant between March and May 2017, according to the Office of National Statistics (ONS).[2]

In addition, average debt levels per UK household reached a record £12,887 in September 2016[3] – that’s without even taking mortgages into account. If you have debts that you would struggle to pay off without your current level of income, loan protection insurance can help to provide peace of mind and safeguard you in a worst-case scenario.

How much does loan protection insurance cost?

The monthly premiums for your loan protection insurance policy will depend on a variety of factors, including:

  • Your current employment situation
  • Your gross annual salary
  • Your desired level of cover
  • Personal details that may affect your likelihood of making a claim

ActiveQuote can help you to compare prices of the most popular loan protection insurance policies, finding the best deal for your given situation.

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How do I compare loan protection insurance policies?

At ActiveQuote, we help customers to select the best loan protection insurance policy for them by comparing quotes from leading UK insurers and providing free, impartial advice tailored to their individual needs.

Who should consider it?

If you have a mortgage, you should consider whether taking out Loan Protection Insurance is right for you. It will ensure your family is not burdened with paying off the mortgage if you are diagnosed with a serious illness, become unemployed, terminally ill or pass away.

It can be particularly helpful if:

  • You don’t have Income Protection Insurance, or your monthly Income Protection benefit amount wouldn’t be enough to cover your mortgage and living costs.
  • You don’t have life insurance, or your benefit wouldn’t be enough to cover your loan.

What to know about credit or loan insurance

Credit or loan insurance provides coverage that may help you pay off your loan or make your loan or credit card payments in the event of job loss, critical illness, accident or death.

Credit or loan insurance is usually offered at the time your mortgage, line of credit, credit card or loan is being approved. You can also sign up for it at a later time.

This type of insurance is also known as:

  • creditor insurance
  • balance protection insurance
  • balance insurance
  • debt insurance

Credit or loan insurance is a separate product from a loan or credit card. You do not have to take this insurance to be approved for a loan or activate your credit card.

Not all credit and loan products will offer the same type of insurance coverage. For example, you may be able to get life insurance and critical illness insurance coverage on a line of credit, but not disability insurance.

Compare insurance coverage and cost with the coverage you may have through an individual plan or your employer in case of death, critical illness, disability, or job loss. You can also compare the coverage offered by other insurance products, such as term life and health insurance.

Decide if you need credit or loan insurance

Before you enter into a review period or sign up for insurance on your credit card or loan, make sure you receive and review information on the cost, coverage, and the benefits that could be paid. This information is found in the certificate of insurance.

You can usually get a sample certificate of insurance from the financial institution that provides you with a loan or credit card, or find one on their website. You don’t need to sign up for this type of insurance or enter into a review period to get a sample certificate of insurance.

Use the certificate of insurance to determine:

  • if you’re eligible for coverage
  • how much the insurance will cost
  • what the maximum benefit would be
  • what’s considered an exclusion or limitation
  • when an insurance benefit would be paid or declined if you make a claim

Be aware that your coverage may be reduced or end when you reach a certain age, or that there could be limits on claims for specific medical conditions.

If you have any questions about being approved or what the insurance will cover, contact the insurance company directly before signing up for credit or loan insurance. The insurance company will be listed under the terms and conditions found in the certificate of insurance.

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