Lending industry has become more and more competitive in the recent years. The lenders are trying to take hold of the industry by lowering the interest rates to attract more and more customers. One of such ways they come up with is to provide several other products which accompany the loan. Payment protection insurance is one such product which accompanies your loan.
Payment protection insurance, also known as Credit Insurance, is a good idea if you are taking out a large loan. Payment protection insurance helps the insured to payoff the insured balance of his/her loan in case any exigencies such as lose of job, long leave due to medical emergency or the death of the insured during the term of the loan.
Payment protection insurance helps the borrowers to avoid getting into debt by maintaining their repayments in case of any emergencies such as sickness, accident or unemployment. Payment Protection Insurance schemes are offered to protect the borrower from most types of personal credit such as personal loans, mortgages, and credit card repayments. Generally, insurance cover is purchased only at the time the finance agreement is made. Payment protection insurance is available for anyone aged between 18 and 65. The policy is generally offered to those who are employed for about 16 hours a week or on a long term contract or have been self-employed for a definite amount of time.
All payment protection insurance policies will have a period at the start of each claim which you have to wait before payments starts. Once a claim has been established, benefit payment periods will change buy generally claims are offered for about one year (in most cases), but some may last as long as two years.
Before you decide to take payment protection insurance you need to be well aware of the true costs and benefits of payment protection insurance. The cost of the insurance is one of the main factors to be checked before selecting payment protection insurance or any other insurance. It is often seen that payment protection insurance can cost as much as the loan interest repayments. That is the payment protection repayments when calculated can effectively double the cost of the loan. Therefore it is highly recommended to check how much will be your insurance repayment charges when you opt for a payment protection insurance scheme.
According to some people taking payment protection insurance is a good idea as they think that the insurance scheme offers peace of mind when lives and jobs become more and more unstable. But financial experts say that this is not true in all cases. Every insurance policy and its payment vary, so you should be very careful on the monthly payment of the insurance policy you take. Check whether there is any exception or exclusion available for the policy you selected.
Nowadays, most of the lenders offer payment protection insurance whenever a borrower applies for a loan. But it may not be the best payment protection insurance policy available in the financial market. Hence it is highly recommended to shop around before you stick on a particular deal. With a little research you will surely get a payment protection insurance which best suits your needs.