Even though it gained a rotten reputation as one of the most frequently mis-sold insurance products of the past few years, does one really need payment protection insurance?
By: Ringo Bones
During the housing bubble that lead to the subprime mortgage crisis and the 2008 global credit crunch, payment protection insurance gained a rotten reputation as one of the most frequently mis-sold insurance policies of the last decade. It is supposed to cover your debt repayments if you can’t work, but many policies were mis-sold alongside legitimate financial products. If you’ve ever taken out a loan, mortgage, credit card or store card, or bought something on credit, then there’s a chance you were mis-sold a payment protection insurance policy at the same time. But what is payment protection insurance?
Payment Protection Insurance, also known as PPI, is a type of short term protection. This type of policy covers you for a loan payment if you are made redundant in your current job or find yourself unable to work due to illness or accident. The right policy means you will be able to meet your payment obligations if something goes wrong. Unlike credit insurance, which was developed to protect businesses against undue credit losses but does not cover credit transactions between retailers and customers, payment protection insurance is designed to help you keep up with a loan or credit repayment if you are unable to work because you have become ill, had an accident or made redundant in your current job. Most people use payment protection insurance to cover financial commitments such as their mortgage, credit card payments or loan repayments, thus making sure that you are able to cover these debts and will help you in keeping out of debt if you do find yourself unable to work.