Loan insurance is all about peace of mind, it is always difficult to accept extra charges to a loan for that personal improvement, house extension or car but when you weigh it up you really should think about it.
Doing the math – a £10,000 loan payable over ten years with loan insurance would only be £3 per week extra. Would you take £3 per week for peace of mind?
Or you could be looking at a situation like this.
After 3 years of paying on time every time you become unemployed, you cannot get back into work and so have no income to support repayments to the lender. You may be okay for a month or two becuase of your great repayment history but this will have huge negative effects on your credit rating and it will only be a matter of time until the lender is coming after you for the payments.
This could be avoided for £3 per week, is this a situation you really want to find yourself in? No, me neither so next time you are applying for a loan to cover that large outlay make sure you say “Yes” when the sales person ask “do you want insurance with that”.
Though one caveat to that is in the shape of eligibilty, you really need to dig deep into the policy, understand the exclusions and make sure you are 100% elibible to claim on the insurance if all goes wrong. As with the case of PPI, banks have been found to be mis-selling payment protection insurance to customers who are inelgibile to make a claim if required.