Loan Protection Cover
If your lender convinced you to purchase loan protection cover based on the premise that it would provide assistance in making repayments in the event that you were unable to because of unexpected unemployment, injury, or sudden illness, you may be able to file a claim and receive a full refund for your insurance payments if the policy was mis-sold. A policy is classified as mis-sold PPI if a loan company convinces the borrower that it's vital for the approval of the loan, or that not buying the payment protection insurance policy could reduce the overall loan amount. In addition, the lender is required to adequately inform the borrower of the policy's terms and conditions.
How Much Does Loan Protection Cover Really Cost?
Most lenders pay for a PPI policy by charging a one-time premium upon loan signing, which is added to the overall loan amount and then begins to accrue interest. The typical cost of a PPI policy on an unsecured loan ranges anywhere from 10 to 50% or more of the overall loan amount. Thus, a £20,000 personal loan could include a PPI policy that is as excessive as £10,000. However, given the recent scrutiny and criticism aimed towards payment protection insurance companies and lenders that mis-sell PPI, most lenders that engage in mis-selling will limit the cost of the policy to below 30% of the overall loan amount.
Why Am I Ineligible for Loan Protection Cover?
Although payment protection insurance is supposed to provide coverage in the event of unemployment, illness, or injury, the policy will only provide repayment assistance if certain scenarios caused the borrower to be unable to work. It should be noted that you're not alone in your ineligibility, as more than 85% of PPI policyholders are denied policy benefits and must file a payment protection claim against their lender to receive some form of loan protection compensation to avoid debt. Many payment protection insurance companies refuse to honour a great deal of claims simply to maintain profitability, and this mentality has caused the lenders and insurance companies involved in the underwriting of PPI policies to earn approximately £5.5 billion in PPI policy premiums.
Why Do so Many Lenders Sell Loan Protection Cover?
Now that you know that most PPI policies are useless to the borrowers that they are supposed to protect, you may be wondering why so many lenders sell loan protection covered in the UK. Unfortunately, the undeniable answer is - greater profits. Many lenders that they sell PPI have long-standing relationships with insurance companies that provide commissions each time the policy is sold, regardless of whether the borrower was actually eligible for the loan protection cover begins with. Although 95% of cases brought before the financial ombudsman service (if OS) are honoured, only about 50,000 to 70,000 UK residents file PPI claims each year, which is less than 1% of the more than 30 million PPI policies currently in existence. Thus, many unscrupulous lenders choose to continue to mis-sell PPI policies despite ongoing warnings by financial authorities and as a result end up paying hefty fines and loan protection compensation.
blog comments powered by