It’s a form of short-term income protection that can cover your debt repayments if you're unable to work.
It’s sometimes known as loan payment protection insurance and policies can cover you for accident and sickness or unemployment. You can also find policies that cover you for all these eventualities.
If you find yourself unable to work, a loan protection insurance policy will pay out monthly benefits directly to you.
Whereas payment protection insurance (PPI) will typically be attached to one debt, you can use loan protection to pay off any debt you choose, whether it’s your mortgage or credit card repayments.
You can protect up to 70% of your gross annual income and payouts will normally be tax free. However, this will mean higher premiums, so only choose what you can comfortably afford.
It completely depends on your financial situation. If you would struggle to make your minimum loan repayments without your salary, you may want to consider it.
Don’t just choose the first policy that comes along. Shop around to find one that suits your budget
You may be in a position where you can change your cover or cancel it completely
It may be tempting to choose the highest amount you can but it’s not always necessary and you’ll end up paying higher monthly premiums
You may see premiums reduce if you increase your deferred period by a few months
When you compare loan protection policies with us, you’ll choose how long you’d like the cover to run for, after which time your policy will end.
If you pay the loan off before this time, get in touch with your provider and it’ll be able to advise you on what to do next.
Some loan insurance policies exclude those who are self-employed as well as those who are on short-term contracts.
Check the terms and conditions before you buy to make sure you’re covered.
All types of insurance have a cooling-off period of 14 days.
There may be restrictions on a person’s age in the small print of your policy. Double check to see whether you’ll still be covered as you get older, and how this will affect your premiums.