If you aren’t able to work a Payment Protection Insurance policy is put in place to cover the monthly repayments of the finance it is taken out alongside.
What is Payment Protection Insurance?
Payment Protection Insurance policies can be taken out alongside mortgages, credit cards, store cards or when obtaining credit on high value items such as vehicles and furniture. With a Payment Protection Insurance policy, an agreed sum of money is paid out each month to fully cover (or with some policies cover a percentage of) the payment due on your finance.
A Payment Protection Insurance policy will cover you, if you:
- become unemployed, through no fault of your own
- are involved in an accident
- suffer an illness
Typically a Payment Protection Insurance policy will cover your monthly finance repayments for 12- 24 months. After the period that is defined in your particular policy is over, you will have to cover the monthly payments yourself.
Not all Payment Protection Insurance policies are the same; each individual policy will have different levels of coverage and different exclusions. However, the majority of Payment Protection Insurance policies will not cover you if you were self-employed, unemployed or retired at the time of taking out the policy. You will also not be covered under the terms of most policies, if you already had a medical condition or illness that could prevent you from working, prior to taking out the Payment Protection Insurance cover.
Payment Protection Insurance is also sometimes known as Loan Protection Insurance or Accident, Sickness and Unemployment (ASU) cover. Payment Protection Insurance may sound like an ideal product, a product worth having and a product that will ensure you are covered in times of financial strain, however the problem with Payment Protection Insurance was that it was vastly mis-sold. Very few people are able to make Payment Protection claims due to the insurance being unsuitable for their needs. Customers were sold the insurance despite never actually being able to make a claim, they could have been retired, self-employed, unemployed or could have had an illness or injury that could have stopped them working, either way, they were mis-sold Payment Protection Insurance.