Payment protection insurance
Loan, income or mortgage payment protection insurance
A primary attraction of loan, income or mortgage payment protection insurance, which pays out a monthly income for a maximum of 12 months if you are unable to work as a result of illness, injury or involuntary unemployment, has always been its simplicity.
The product, which is also commonly known as “accident, sickness and
unemployment (ASU) insurance”, has normally charged a single flat rate for all loan, income or mortgage payment protection insurance policyholders, regardless of their age, occupation, gender and smoking habits.
This makes it easy to understand and enables cover to be arranged almost instantly. But the downside is that the flat-rate charge is prohibitively expensive to many people, because those who are least likely to claim effectively have to cross-subsidise those who are most likely to.
Even the most competitive specialist loan, income or mortgage payment protection insurance providers have tended to charge around £4 a month per £100 of monthly cover, and unscrupulous High Street lenders
have commonly charged 25% to 50% more than this.
Securityfirst.co.uk has therefore come out with a format that goes a long way towards correcting the unfairness of the standard loan, income or mortgage payment protection insurance system, whilst still maintaining most of its simplicity.
Factors such as occupation, gender and smoking habits are still disregarded, but policyholders are charged age-related loan, income or mortgage payment protection insurance premiums. The rate is set at outset and does not automatically increase as they get older.
Premium rating structures differ slightly according to whether you are wanting to protect a mortgage, other type of loan or your general outgoings, but the youngest policyholders can pay as little as £1.60 a month per £100 of monthly benefit.
Indeed, only those aged over 50 have to pay more than £4 a month per £100 of monthly cover, and even they can often get better value than if they buy a standard flat-rated loan, income or mortgage payment protection insurance product via a bank or building society.
A further advantage of the new approach is that policyholders are guaranteed to be able to continue their cover for as long as they pay their premiums. With standard loan, income or mortgage payment protection insurance, on the other hand, providers normally include small print clauses giving them the right to withdraw cover at only 30 days notice.
Nevertheless, securityfirst.co.uk’s policies do not necessarily suit everybody. Like all loan, income or mortgage payment protection insurance, for example, they represent better value for employed people than for the self-employed, because the latter are only covered for involuntary unemployment if they actually cease trading.
Even employed people are not covered for voluntary redundancy, which can be a big issue for those working in industries where this has become a common way of leaving employment.
Those with recurring health problems may also find the loan, income or mortgage payment protection insurance cover unattractive on the grounds that conditions that existed prior to the start of cover (so-called “pre-existing conditions”) are excluded – although this exclusion is waived if you haven’t suffered from the condition concerned for at least two years from the date on which you became unable to work.
But many of those affected by such exclusions may still consider this age-related loan, income or mortgage payment protection insurance cover to represent good value in view of the low premiums they are required to pay.
