When you apply for a home loan, a personal loan or a credit card you might be offered a policy called Loan Protection Insurance (LPI) or Consumer Credit Insurance (CCI).
LPI and CCI are both types of insurance that are meant to help you in the event that you cannot afford your loan payments due to injury, sickness, unemployment, disability or death.
These types of policies might advertise that they offer you financial protection, but often they have very high insurance premiums, with low rates of successful claims.
Is LPI right for you?
If you are taking out a large loan, like a mortgage, you might feel nervous about what will happen in the event you can no longer afford your mortgage payments. Having some form of private mortgage insurance might seem appealing, but it’s important to make sure you are buying a policy that is right for you.
You should always take your own personal finances into consideration before you make any financial decision, and that includes insurance.
Reasons you might consider LPI include;
- You have no other insurance to protect you
- You’re a single income household
- You are eligible to make a claim
Even if these things apply to you, it’s good to shop around for different types of insurance to make sure you are getting one that will be of good value to you.
Should you buy an LPI policy?
Many people are not even eligible to make a claim on their LPI policy, leading to wasted money with no actual benefit. If you already have a medical condition, disability or illness you may not be eligible for any payments if you end up unable to work because of a prior existing condition.
Many policies won’t cover you if you are self-employed, casually employed or if you voluntarily leave your workplace.
If you are already covered by long term life insurance, with a death benefit, or any other type of insurance, LPI might be irrelevant to your circumstances.
If you decide to sign up for LPI, you should make sure that the salesperson properly explains the policy to you, and provides you with all of the relevant and necessary documentation. Every policy will have different terms and conditions.
Many policies have very high premiums but offer very low payouts when you claim. Make sure that you are getting a good value policy for the money you are paying. Many policies would only be enough to partially pay off your mortgage or loan, and may only last for 6 months.
Just like with any product or service, LPI is designed to make the insurance company money. Unfortunately, this means that the salesperson doesn’t always care whether this policy is right for you, they just care about making an extra sale.
Have you been mis-sold LPI or CCI?
Mis-selling of LPI and CCI policies has been a growing problem, with many salespeople taking advantage of people and selling them products they don’t need.
LPI is not a mandatory requirement for taking out a loan, and a salesperson should not make you feel pressured into buying one.
Some people may try to hide the policy in your paperwork, so you aren’t even aware that you are buying LPI. Other salespeople may sell it to you as a packaged deal when it should be sold separately.
If you think you’ve been mis-sold LPI or CCI, contact us at RTR Claims to get your claims process started.
We work on a No-Win, No-Fee basis, meaning you have nothing to lose when you work with us.