Egg loan protection insurance rip off

snipped-for-privacy@aol.com (alfi) wrote in news: snipped-for-privacy@posting.google.com:

Egg provide little explanation (apart from small print) or illustration of how their insurance works. In my experience, it works as follows.

If you lose your job, the maximum amount of insurance benefit payable is equal to the account balance as at the redundancy date. In the 12 months following that, you get paid 1/12th of that balance month by month: each month's benefit payment is thus the same.

Every month the account balance is reduced by a benefit payment calculated as above. Then, as before, interest is charged at the usual rate on the outstanding balance. Plus (unless you cancel the policy) a further monthly premium on the insurance policy.

The result is that, if you don't manage to find another job fairly quickly, the insurance doesn't fully cover you for the risk of falling substantially behind with your payments. Interest and premiums continue to accrue each month on the outstanding balance.

It's obvious that this is simply a money-making wheeze for Egg, and a bad deal for the customer.

Without a hint of irony, snipped-for-privacy@aol.com (alfi) astounded uk.finance on 20 Jul 2004 by announcing:

You can almost certainly replace "Egg" with any other bank you care to mention. The golden rule is never to buy payment protection insurance from the lender. Their margins are about 80% IIRC - i.e. you're paying about 5 times as much as you actually need to.