You might have heard of payment protection when taking out the loan with the lender on the high street. Usually when they sell you a loan or mortgage they will try to get you to take out cover for it in the form of loan or mortgage protection. If you do they are happy as you are contributing towards the £4 billion in profit that they make from the sale of the cover. If you want to keep your own pocket happy then choose to buy your policy independently and make savings of as much as 40% on mortgage protection and 80% on loan protection.
Independent specialists offer the best deals with the cheapest premiums for policies and this is also where you can find out what covering your payments entails. You can find policies that will begin to provide you with your income after just 30 days of waiting. However some providers might ask you to put off the claim until the 90th day. Some will continue supplying cover for 12 months while others might pay you each month for 24 months.
All providers should ensure that they supply the facts needed for you to determine which type of cover might be the most suitable for your needs as you are able to take out a policy to cover different factors.
Income payment protection pays out a portion of your own income which would be the amount that you insured when taking out the cover. You would then receive this back if you should become unemployed by redundancy or if you became sick or suffered an illness. As you would have a replacement income you would be able to keep up with all your essential outgoings which would include mortgage and loan repayments. You would not have to worry about the electricity or such as gas bills as these could also be maintained. You would also be able to keep food on the table and maintain other household necessities.
If your main concern is where to get the mortgage money then mortgage insurance might be adequate protection. You would insure for up to a certain amount of your monthly mortgage repayment and then this would allow you to continue paying your mortgage. You would not have the lender breathing down your neck for missed payments nor have the worry of repossession. This would allow you to think only of getting better and being able to go back to work or it would allow you the chance of looking around for another job.
Covering your outgoings with protection insurance should be considered by all those who work full time in the UK and who have financial commitments to keep up with. Even if your only concern is keeping up with loan repayments you can protect against losing your income with loan payment protection insurance. This policy would present you with the sum of money needed to be able to meet the payments each month. At the least missed payments affect your credit score and in the worst cases the lender will take you to court.
Simon Burgess is Managing Director of the award-winning British Insurance , a specialist provider of payment protection .