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Do You Really Need Payment Protection Insurance?

Updated on June 8, 2014

If circumstances affected your ability to earn an income, would you have access to funds that would enable you to keep up with debt repayments? Being unable to work due to an accident, injury or illness can be a nightmare proposition if you do not have savings to fall back on. Payment Protection Insurance (PPI) can meet your payments while you are unable to work but it is not necessarily the best choice for everyone. Here are some tips to help you to decide whether you really need to have PPI cover.

What Is Payment Protection Insurance?

If you are unable to work through no fault of your own, PPI can cover repayments on loan, mortgage and credit and store card debts. It typically covers accidents, injuries and illness but many policies have restrictions that will exclude certain conditions and situations. Unemployment can also be included if you are made redundant, for example. Payment Protection Insurance is often offered alongside loans and credit.

Who Is Eligible for Payment Protection Insurance?

Not everyone will be able to arrange PPI. You will need to be in full-time employment for the most part, which rules out anyone who is self-employed, retired or working on a part-time basis while studying. You may also be ineligible if you are dismissed from your job or if you take voluntary redundancy. It is therefore important to check the small print before you buy any Payment Protection Insurance policy to avoid any nasty surprises if you need to make a claim.

Is It Really Necessary?

Payment Protection Insurance can be an expensive type of insurance to buy and you may be better off using other forms of protection. This can include life insurance, Critical Illness insurance or Income Protection Insurance, sickness benefits that may be available through your employer. You may already have one or more of these in place already, in which it may not be worthwhile arranging Payment Protection Insurance as well.

If you have savings to fall back on, this can also be preferable to taking out Payment Protection Insurance. The downside to this is that you may deplete your savings if you are not able to work for months or even years. There is also the possibility that other problems could occur at the same time, which would further drain your emergency fund. If your savings are not particularly extensive, you may want to look at other forms of protection.


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    • dippykitty profile image

      Sally 3 years ago from UK


    • DowntroddenInDC profile image

      DowntroddenInDC 3 years ago from Houston, TX

      Almost all insurance is a gimmick to make money for someone. These insurance policies rarely live up to the way they are advertised and explained. They use a lot of puffery and gimmicks to get you to sign the dotted line. You are better off having a emergency buffer fund of 6-12 months of expenses.