Payment Protection Insurance – Do you really need it?
There are a lot of insurance products available these days. However, one new one that has attracted some amount of attention is payment protection insurance. In fact, this single product is making credit and financial service providers billions of pounds in profit each year.
The way payment protection insurance works is you are charged a set amount for every one hundred pounds you owe per month. For example, if you are charged one pound for every one hundred you owe on a credit card, then if you have five hundred pounds outstanding on the card, you will be charged an extra five pounds a month for the insurance.
The benefit of the insurance is that should be become unable to keep up with your repayments, the insurance will step in to make them for you.
However, there are certain severe limitations to payment protection insurance that you should be aware of before you sign up to it. First of all, the insurance will only make the minimum repayment. Therefore, there is little chance that the insurance will ever fully repay the money you owe. Just keep it under control for you.
The other limitation with payment protection insurance is that it will only pay out in very limited circumstances. If the reason you cannot meet the repayments can in any way be attributed as your own fault, for example if you quit your job or were fired for misconduct, then you will not get any benefit for the insurance. Therefore, it is important to ask yourself if you will get anything for the money you spend on payment protection insurance.