Being Aware of Payment Protection Insurance
There are many borrowers who have taken out payment protection insurance on their loan, not knowing that it was not a mandatory requirement. Although lenders may pressure you into taking out payment protection insurance, they do not tell you that most loans do not require you to have payment protection insurance.
Payment protection insurance is an insurance policy on your loan where you pay a specified amount each month for the purpose of the event that you may not be able to make your monthly repayments due to illness, an injury, or an involuntary redundancy. If this does occur, the payment protection insurance should cover your expenses, and with some policies the insurance will also pay of additional expenses. This can be reassuring for some borrowers, and especially reassuring for lenders, as it is a form of security ensuring that they will receive payment on the loan.
There have been reports, however, of borrowers who have been pressured or led to believe that the insurance coverage was a requirement, only to find out that the payment protection insurance that they currently have in place is unsuitable for their loan or unnecessary. This can happen if the lender is not completely honest with the borrower, or the borrower is not made aware of the insurance. There are some cases where the borrower does not realise they are paying for the payment protection insurance until they are far into the repayments of the loan. That is why it would be best that you read over the loan documents carefully before signing, and asking questions for any unknown charges.
If the lender does in fact require that you take out payment protection insurance, you may want to shop around for standalone policies. You may find that there are some policies that are cheaper, and even better than those your lender is offering.