Is insurance a debt trap?
Thousands of people up and down the country are starting to question the extra debt incurred from costly loan insurance which is added to services such as credit cards and loans.
It is estimated that up to 7 million payment protect insurance schemes are sold each year to a naïve public who are encouraged to pay extra for a service that they may never use. Loan insurance, also known as ‘debt cover’ is encouraged as an additional extra to your loan repayments. Creditors claim that it will give you the peace of mind of knowing that your repayments will continue to be made should you become ill, have an accident or become unemployed, when in reality it could just leave you with more debt problems.
Many are unaware of the numerous exemptions to claiming this insurance, so it is worth finding out if you are eligible, before you add this extra expense to your loan. Self-employed, housewives and students should not expect to be covered and if, in the unfortunate event, you are sacked or suffer from long term illness such as back pain or stress, you will not be entitled to protection.
If you have been charged for insurance which is not applicable to your circumstances, good news is at hand. The Financial Services Authority are allowing people to claim for the expenses incurred from being sold misleading insurance. Take a look at your statements, as removing unnecessary debt cover can significantly reduce your monthly outgoings.
In one instance a consumer was charged £5,612 for debt cover on a £4,700 loan, if you add the interest charges to this amount, the loan increased to £14,537. This gentleman is now reclaiming £2000 that he spent in payment protection, from the company that sold him his insurance.
If you suspect that you are being charged debt cover on your credit cards, loans or mortgage, claiming your money back is easy and there are many debt advice companies who will advise you how to proceed further.
Finance News posted on 30/05/2007 15:46:59
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