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What does payment protection insurance offer and should I take it?
Whenever you take out any sort of finance, such as a loan, you will be offered a form of payment protection known as PPI, which stands for payment protection insurance.
Although this type of cover can be valuable and offers peace of mind, there are some things that you need to bear in mind before you rush into taking out any particular PPI policy. This includes:
- PPI does not have to be taken with the lender through which you take your loan
- The cost of this cover can vary from one company to another so you should shop around
- This type of cover can prove costly
- PPI is not always beneficial to everyone – for instance those that are self employed cannot fully benefit from this cover
- Many companies may quote you on a loan and automatically include PPI, so you should always ask for a quote with and without PPI
About payment protection insurance
Payment protection insurance is a type of protective insurance cover that is offered with loans as well as with other types of finance, including both secured loan finance and unsecured loan finance.
This type of cover is designed to cover your loan repayments for a specified period in the event that you cannot meet the loan repayments due to certain circumstances – through redundancy, accidents, or sickness, where you may find that your income suddenly falls.
Payment protection insurance can offer peace of mind, but you need to remember that it can prove costly and in some cases – for instance if you are self employed – you will never be able to enjoy the full benefits of the cover.
You should also remember that there are many companies that offer PPI, and the cost of cover can vary, so you should never assume that the cover would be cheapest with the company that you are taking the loan through.
Instead you should shop around and ensure that you are familiar with the benefits that each policy offers before you make a decision.
You are not obligated to have PPI when you take out a loan, but many people enjoy the security that this type of cover can offer.
However, do bear in mind that some loan companies will automatically include PPI, and many people end up signing up for a loan with PPI included without even realising it, thus losing the chances to find a more competitive deal.
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