Claims on this type of insurance have soared about 40 per cent, pushing up the premium rate. Which? found that on a typical pounds 5,000 loan over five years the cost of borrowing increases from pounds 2,500 to pounds 4,000 with credit insurance - an increase of 65 per cent.
Credit insurance on credit cards and store cards costs about 70p per pounds 100 of the outstanding balance. For instance, credit insurance on pounds 1,000 borrowed on a Barclaycard over six months would increase the cost of the loan from pounds 63 to pounds 89.
According to Which?, the TSB charges the most for an insured loan over one year, with a monthly repayment of pounds 102.20. The cheapest is Alliance & Leicester with a monthly repayment of pounds 97.56.
On an insured loan of pounds 5,000 over five years, the most expensive lender is National & Provincial with monthly repayments of pounds 157.42. The cheapest is Abbey National with monthly repayments of pounds 140.38.
Credit insurance on loans was sold through the use of a 'negative tick box': you ended up buying the insurance unless you ticked the box.
From January this year, the large lenders decided to stop selling insurance this way - with the exception of Barclays and Midland, the magazine adds.