Should you protect your loans and credit cards with PPI?

Reno Charlton

PPI, or Payment Protection Insurance, is a type of protective insurance cover that is offered with different types of finance, such as credit cards, store cards, and loans. This cover is designed to cover repayments on your loan or card for a specified period of time in the event that you are unable to work and make repayments for a certain period due to sickness, accident, or redundancy.

This type of insurance can prove invaluable to borrowers, offering peace of mind and financial protection in the event that you cannot keep up with your loan and credit card repayments. Nobody knows what fate has in store, and losing your job or finding yourself unable to work for a while due to sickness or an accident can leave you financially crippled, which can make keeping up with loan and credit card repayments impossible. Of course, if you do start missing your repayments you face damaging your credit as well as more severe action such as court proceedings, not to mention the added stress and worry at an already difficult time.

When you take out PPI your repayments will be covered for a set period, which will be specified in your policy, if you cannot work and make your repayments through redundancy, sickness, or an accident. This means that you won't have to worry about how you are going to make repayments on your debts, instead, you can focus on getting yourself back on your feet, or getting another job, whilst your insurance cover takes care of your repayments.

However, there are some things that you should remember about payment protection insurance cover. This includes:

- PPI is not suited to everyone that takes out finance. For example, if you are self employed there is little point taking out a policy that protect you against redundancy because you will never be able to benefit from it

- PPI is not compulsory, although some lenders may make it sound as though it is. It is an optional form of cover, and you should never feel forced to take it out if you do not wish to do so.

- You do not have to take PPI from your lender. You can shop around, as the cost of cover can vary widely from one provider to another. Therefore, if your lender is offering a policy that seems quite pricey but you don't want to be without this cover make sure you compare different policies before you make a decision.

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Reno Charlton, award-winning writer, shares her financial expertise as a contributing columnist for Credit Card Comparison - Compare Credit Cards and Personal Loan Comparison - Compare Loans.