Do you know what payment protection insurance (PPI) is and what it does? Most often sold with a mortgage or auto loan or in conjunction with a credit card, PPI is an insurance program that is meant to cover your payments if you are unable to do so due to unforeseen circumstances such as accident, illness or job loss. You can find out more by clicking here for more info.
PPI is considered to be a voluntary debt cancellation program. However, some loan providers have made purchasing PPI a requirement for approval. No one should be forced to purchase payment protection insurance.
The cost of the PPI coverage is based on the loan amount and is often added to the monthly payment.
Although payment protection insurance sounds beneficial, there are reasons to be wary. A major study showed that 85% of people who tried to file PPI claims against their policy were unsuccessful. Policies may exclude coverage for many of the most common reasons people are unable to work including mental illness and chronic back problems. Some policies include age limits or automatically exclude anyone who is self-employed.
If coverage is granted, another surprise may await you. Many times the amount of money made available is not enough to cover all of the loan or it is for a shorter period of time than is needed.