I am thinking of taking out a personal loan of between 20-30K. Is there any real benefit of taking out the loan protection or is this just a way for them to get extra money out of me in the long run
To some extent it is a real money making ploy by the banks. There are some terms and conditions applied, for example you must be working in your current job for more then 6 months.
Would you not consider a credit union loan where this cover is provided free of charge?
This is not correct. CU loans come with "free" life assurance cover which will clear the loan if the borrower dies but they do not come with "free" repayment protection which I presume is the subject of the original poster's query.