No matter how well things are going, unexpected problems can arise at any moment. Some of those problems can be a huge threat to someone’s financial stability. Debt is more than a number on a spread sheet, it’s a commitment. Money can’t simply be given back once it’s spent, and while bankruptcy is always an option for those who need an out, it makes life ridiculously difficult for seven years after the fact. It is simply unacceptable for someone to leave his financial future up to chance, which is where payment protection insurance comes in.
What is PPI?
Payment protection insurance comes into effect when someone is rendered unable to work due to an injury or some other extenuating circumstance. Unemployment is covered under some policies, but there isn’t a reasonably priced option on the market that will provide coverage if someone quits a job voluntarily or gets fired because of poor behavior. Some PPI policies will come into effect after someone’s death, but it’s better to have a life insurance policy for situations like that.
PPI covers monthly debts for a certain period of time from the date the policyholder becomes unable to work. Most policies have a limit of 12 months, but the length of time varies. PPI serves one simple purpose: it covers monthly debt payments until the policy expires or the policyholder gets back on his feet. It generally won’t clear any debts, and it won’t have a major impact on the balance sheet, but it will buy the policyholder some time to re-establish his income.
PPI as Part of Other Insurance Packages
PPI is not adequate coverage on its own regardless of what it’s applied to. It is a stopgap measure, which is there to ensure that the policyholder is able to get back on his feet when his other forms of coverage don’t apply. Mortgage life insurance is the best example of this. If someone becomes permanently disabled or dies, his house will be completely covered by his insurance policy. While some PPI policies can go into effect following a person’s death, it is wholly inadequate for any family members who are left behind. Likewise, mortgage life insurance is inadequate by itself for anyone who suffers an injury that isn’t fatal.
Who Should Get PPI?
Anyone who carries a substantial amount of debt should consider getting an insurance policy with PPI attached. It isn’t suited for every circumstance; putting PPI on a credit card is usually a waste since most policies will only cover the minimum monthly payment. It might be worth it for someone with thousands upon thousands of dollars in credit card debt, but for most, the minimum payment can be covered with savings.
PPI shines when it’s applied to an investment or a large loan. It can provide the necessary stopgap that will keep a family in their home, and it ensures that business owners have a business to come back to once they’re better. PPI is for people who have something they need to protect.
[Pamela Muff is a freelance blogger who writes on behalf of ppiclaims.uk.com, a website where you can learn more about payment protection insurance and file claims.]
