Payment Protection Insurance also known as the PPI is a scheme that aims to cover financial obligations that you have in case you get sick, meet an accident, or lose your employment. The repayment usually covers a year or two in some cases.
Payment Protection Insurance mainly comes in play in the case of individuals who have taken up large loans like mortgages, car loans, or other forms of long term loans. It is easy to get stuck with that loan and risk losing all your valuable assets in case you meet unforeseen occurrences that render you unable to meet the loan installments you are required to pay monthly.
Payment Protection Insurance is usually taken up at the same time you take up the loan. It is not a compulsory plan that every one is required to take when taking up a loan. This is why you as an individual need to review your circumstance and ascertain whether you need a PPI or not. The PPI is usually costly and is not the most ideal option for you if you have other means you can cover your monthly installments in case you are unable to work.
There are loans which come inclusive of PPI. In such cases, you need to know how much the PPI costs and how much you will be paying for the same on a monthly basis. You should also ask under what instances, does the insurance step in to play. Failure to screen a loan well may land you one where you will unknowingly pay for PPI along with the loan. This is why it is important to read through your loan application to identify such things in the clauses on the agreement form. In such loans, the insurance cost is inclusive in the monthly installments you are paying thus may leave you unaware of the fact that you are paying for insurance. In case you find that a lender is forcing a PPI on you when you don’t need it with the loan, opt for a different lender who can offer you a loan without the PPI.