Insurers to extend payment holidays and lower bills for struggling customers until end of October
HOUSEHOLDS struggling to pay insurance bills due to the coronavirus crisis are to be given until October to ask for a payment break, the watchdog has said.
The Financial Conduct Authority (FCA) plans for firms to continue to offer the temporary help until October 31 this year, following a brief consultation period.
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This will allow industry insiders to offer their views on the plans, while making sure that the watchdog is able to act quickly to help households.
The extension will apply to all types of insurance cover, including car, home, pet and travel policies.
Back in May, the regulator told insurers they should offer vulnerable customers up to three month repayment breaks.
It also advised firms to look at reducing premiums where a payment holiday isn't appropriate, and offering partial refunds of unused policies to help minimise the stress on bill payers during lockdown.
What is a payment holiday and should you apply for one?
PAYMENT holidays are when a lender agrees to pause your monthly repayments for a set amount of time.
This has to be agreed in advance, so don't stop making your repayments until your bank has given you permission to do so.
The majority of lenders are now offering payment holidays, so get in touch with your bank to find out what help it can give you.
Most of the time, it'll require you to fill out an online form.
Typically, payment holidays are offered in extreme circumstances and are designed as an emergency measure to help you through a difficult financial time.
If you think you need to take one, you should speak to your lender to discuss your options – but do note that the break in payments doesn’t remove any debt or financial obligations.
Most lenders will also still charge interest during this time, so be aware that these costs will keep building up.
You should also always continue to make your normal payments if you’re financially able to.
Sue Anderson, head of media at debt charity StepChange, said: “If you can continue to make your normal payments without difficulty, then you should.
“Any temporary measures being offered by lenders don’t remove financial obligations – they are designed as an emergency measure to help you get through a period where your income may have taken a serious knock.
“However, if you need to use them then you shouldn’t hesitate to talk to your lenders.
“While taking a payment break would usually be noted on your credit file, the credit reference agencies have confirmed that, during the current crisis, this should not have a future influence on your credit status.”
Providers should consider waiving fees associated with changing policy cover as well.
Ultimately, it's up to the insurer to decide what help is granted but it should talk through its reasoning with customers.
Until an extension to the offer of help is confirmed, customers have until August 18 to ask for a payment holiday.
The FCA has already extended similar help available to customers on mortgage payment holidays, as well as prolonging a ban on home repossessions until the autumn.
The watchdog emphasised it is important customers do not leave themselves uninsured, and that their insurance cover meets their demands and needs.
Customers who are struggling due to the economic impact of the Covid-19 outbreak are advised to contact their provider to discuss their options.
The FCA wants to hear feedback by 5pm on Tuesday July 28.
Its draft guidance does not prevent firms from taking their own extra measures to support customers.
In the meantime, insurers should continue to offer the recommended help to bill payers.
Normally, taking a payment holiday would negatively impact your credit score but freezes taken due to the coronavirus pandemic won't.
But the watchdog warns that lenders may still be able to see that you've taken a break on payments through other sources, such as your bank account information.
MoneySavingExpert revealed how taking a payment holiday may stop you from getting a mortgage in the future.
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