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Payment Protection Insurance – Worth The Extra Cost?

Protecting yourself against going into debt is a logical step for many people; but you have to make sure the insurance is actually worth the risk.

Debt prevention

Payment Protection Insurance is an insurance that you can buy to cover your repayments on loans, credit cards, or mortgages against you becoming sick, having an accident or becoming unemployed all of which could mean you were unable to make loan repayments. It’s common for people who want it to take out this insurance at the time when they commit to the loan.


The criteria to be eligible for Payment Protection Insurance, or PPI as its known, are very simple: you just need to have been employed for a certain number of years, or to have been self-employed for a specified number of years, in order to show credibility.

If you have to claim on the policy then there will be a short period at the start of your sickness or redundancy when you will have to meet the repayments as most of these plans don’t actually kick in until three months have passed. The plan will usually then remaining force for twelve months, twenty four months or sometimes more, depending on the cover you have opted for.

The dilemma of the self-employed

Some self-employed people may feel that the insurance isn’t actually worth taking out. Illness is not something that usually stops the self employed from earning money, accidents do happen, but you can assess the risks on your own lifestyle to make that decision and unemployment doesn’t apply, unless they are in a particularly vulnerable industry.

Usually, if somebody has been self-employed for some years they will continue to be for years to come. Loss of earnings for the self employed usually occurs in the first year, this is the make or break time when people find out whether they have what it takes to work for themselves. So for these reasons, many self employed do not feel Payment Protection Insurance is worth the money, but like all these decisions you must make up your own mind or seek professional advice.

A modern condition

Today people are borrowing more than ever. Incomes are comparatively high which enables people to afford to borrow unlike previous generations. So, if the worst should happen and you lose your ability to earn money then the likelihood is that you will still have huge outgoings to cover. This is where Payment Protection Insurance is important, as without it the only alternative may be to sell your family home and downsize to pay off those debts.

Scarily enough, it might not be just existing debt that you won’t be able to afford to repay, without an income and with no Payment Protection Insurance your other daily bills might also get you into trouble.

With large loans such as mortgages the lender will often insist that you have some sort of payment protection in place before they will lend you the funds. Life assurance, in case of accidental death, is usually compulsory.

What a state!

Although the Government provides some benefits for the long term sick, disabled or unemployed, the amounts payable compared to the average household outgoings is disproportionate.

According to Government statistics between June 2002 and May 2003 755,000 people were made redundant. That’s 3,000 people in Britain losing their incomes every day.

And of course, accidents do happen. We are constantly reminded of the frequency of road accidents. For example, in 2000, 320,000 people were killed or seriously injured on British roads.

So with statistics like these perhaps Payment Protection Insurance is not such a bad idea after all? Can you afford to take it and can you afford not to? Only you will know the answer.

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Posted on: [ November 03, 2017 ]       Add to   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon