Loan Protection Insurance -
Key features

This type of insurance is designed to protect the loan repayments you make to your finance company if you lose your job due to involuntary unemployment, are unable to work due to a disability (accident or sickness), you suffer a specified critical illness or you die.

This insurance will typically:

• repay your monthly loan amount in the event of your involuntary unemployment or disability for up to 12 months or to the end of your loan agreement, whichever is earlier;
  
  
• repay your outstanding loan balance in the event of your death or you being diagnosed with a specified critical illness.
  

Such plans end if the insurer pays out the balance of your loan in the event of your death or critical illness.

2. Who is eligible for this form of insurance?

In general, you can apply for cover under this insurance as long as you satisfy all of the following:

• you permanently live in the UK, Channel Islands or Isle of Man for tax purposes;
  
  
• you are aged 18 or over and will not have reached 60 years of age by the end of the term of your loan; and
  
  
• you are in good health and not in temporary or seasonal employment;
  
  
• you are not aware that you could become unemployed;
  
  
• you are not aware of any disability or illness which may affect your attendance at your normal place of work;
  
  
• you are actively working for more than 20 hours per week and have been with your current employer for the past six months;
  
  
• you are applying for a loan or have an existing loan that is not in arrears.
  

3. How this insurance works

• You select how much monthly benefit you will need to protect your loan repayment if you are unable to work as a result of unemployment or disability.
  
  
• You select the term of cover which must be the same as the term of your loan agreement. Normally this form of insurance cover has a maximum five year term and will end when you reach the age of 60.
  
  
• You select the number of people to be insured.
  
  
• The insurer uses the monthly benefit (repayment) you choose to calculate the lump sum benefit which we will pay in the event of death or critical illness.
  

Important notes – lump sum benefit is typically calculated by multiplying the monthly benefit you have selected by the number of months outstanding on your loan agreement at the time of your death or critical illness (please note this will not include loan arrears).

For example, if your monthly benefit (repayment) is £500 and there are 20 months outstanding on your loan agreement at the time of your death or critical illness, the insurer will pay a lump sum benefit of £10,000 (£500 x 20 = £10,000). This is just a guide, and may vary depending on the insurer that you choose.

4. When can you make a claim under this insurance?

You can make a claim under this insurance at any time during the period of insurance providing you notify your insurer as soon as reasonably possible. However the following clauses will usually apply:

• The insurer will not pay any claim benefit if you fail to disclose any material facts or if you provide them with any false, misleading or fraudulent information.
  
  
• The insurer will not pay any claim benefit for the first 30 consecutive days of unemployment or disability.
  
  
• The insurer will not pay any claim benefit if your unemployment occurs or is notified to you within 120 days of the insurance start date.
  
  
• The insurer will not pay any claim benefit if a critical illness, unemployment or disability, arises from any of the excluded causes detailed in the insurance wording.

5. How long are monthly benefits paid for?

You will typically receive up to a maximum of 12 monthly benefit payments for any separate unemployment or disability claim under this insurance. However payments will cease earlier than this if your loan is completed, or at the expiry of this insurance, whichever is earlier. Generally speaking you can make a new claim as long as you have been back at work for at least 90 consecutive days. If less than this the new claim will be treated as a continuation of the previous claim unless you have already received the maximum benefits.

6. Maximum cover limits under this insurance

• The maximum monthly benefit the insurer will pay for unemployment or disability is restricted to the repayment of your monthly loan amount.
  
  
• The maximum sum that will be paid for life or critical illness is restricted to £25,000 in many cases, although this does vary.
  
  
• The typical maximum period of time you can be insured for is five years (60 months).
  

7. The number of people who can be insured

If your loan is in your name only, choose single cover.

If your loan is in joint names, you can choose to insure only one of you. Or you can apply for joint cover.

If you choose joint cover, then you are both insured for the full amount of the loan. So, if one of you are unable to work through disability or involuntary unemployment, the insurer will pay the full monthly benefit. However, please note that the lump sum benefit will only be paid out once. This is when either person dies or survives one of the specified critical illnesses, whichever is the first. For unemployment and disability cover, the full monthly benefit is paid if either of you become unemployed or disabled.

9. The cost of cover under this insurance

The costs of cover are often expressed as a rate per £100 of monthly benefits and include insurance premium tax. The following is a general guide, the actual rates offered by insurers may vary from this by some degree depending on the type of cover.

10. Rights of cancellation

Typically you will have the right to cancel this type of insurance at any time. If you cancel within 14 days of the start date, you will be often be entitled to a full refund of any premiums paid, unless you have made a claim. Underwriters can cancel your cover by giving you 30 days written notice and will return any unused premium. This will not affect your ability to make a claim that occurs before the cessation date.