Work out how much insurance attached to a loan really costs — the total insurance cost, the first-month premium and the average monthly premium — and compare the loan with and without cover.
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⛨Total insurance cost
6,849£
First-month premium37.5 £
Avg monthly22.83 £
Cost of credit without120,991 £
With insurance127,839 £
Estimate. Payment protection and life cover are optional and opt-in in the UK (post-PPI). If cover is a condition of the rate, it must enter the APR (CONC App 1.2). Never accept a pre-ticked policy.
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How much insurance adds to a loan. Enter the amount, rate, term and annual premium — see the total insurance cost, the first-month premium, the average monthly premium and the cost of the loan with and without cover. Instant in-browser calculation, no account.
⚖︎ Results are for informational purposes and do not constitute tax advice. For specific situations, consult a licensed accountant or the relevant tax authority.
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iHow it is calculated
The premium is usually charged as a percentage of the outstanding balance, so it falls as you repay; the total is the sum of the premiums over the term, added on top of the interest:
Cover sold as a percentage of the balance is dearest at the start, when the balance is highest, and falls as you repay. After the £38bn PPI mis-selling scandal, protection in the UK is optional and opt-in — never pre-ticked — so always price it separately.
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?Frequently asked questions
Is loan insurance compulsory?
No. In all three markets cover is optional and a lender cannot force it on you. It is sometimes a condition of an advertised rate, however; where it is, its cost must be included in the APR so you can compare fairly.
What was the PPI scandal?
Payment Protection Insurance was mis-sold on a huge scale in the UK — around £38bn was paid back. Since then cover must be optional, opt-in and sold separately; it can never be pre-ticked or bundled without your active consent.
Why does the premium fall over time?
Because it is usually a percentage of the outstanding balance. As you repay the principal the balance shrinks, so the monthly premium shrinks with it — it is highest at the start of the loan.
Does insurance go into the APR?
Only if it is a condition of the loan or of the rate offered. Then, under the FCA rules (CONC App 1.2), its cost is included in the APR. Genuinely optional cover that does not affect the offer can sit outside the APR.
How do I cut the cost of cover?
Shop around rather than take the lender's policy, check whether it is required or merely suggested, and ask for the cost shown in the APR. Life or income protection bought on the open market is often cheaper than a bundled policy.
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