Payment Protection Plan

Payment Protection Plan

If you’re in the process of looking to arrange a mortgage, you may be familiar with the term payment protection plan. Even if your mortgage advisor hasn’t mentioned it, chances are you’ll have heard of it anyway, if you have a credit card or have ever taken out a loan or a hire purchase agreement.

Almost like a failsafe to protect your investment or purchase, a payment protection plan used to be looked at as an unnecessary add-on, much like an extended warranty or similar. However, in this day and age of rising house prices and job guarantees being a thing of the past, payment protection plans have come into their own, especially in the home-buying market.

What Is A Payment Protection Plan?

Simply put, a payment protection plan is an insurance policy that you can take out to protect you from unforeseen circumstances that would affect you financially. They’re most common on loans of any kind, such as mortgages or car loans, although they can be taken out on credit cards and other similar items.

The most common use for them is to protect you if you happen to lose your job, or fall ill, or are involved in an accident. Since you would probably find it difficult to meet payments on your mortgage or any other large loan should you be unable to work for any reason, a payment protection plan is virtually something that should be taken out without any quibbles.

How Does It Work?

If you’re unable to work for a period of more than 30 days, then as long as you have a payment protection plan and you meet the policy’s criteria, you should be able to make a claim.

Once the claim has been made, and accepted, you will receive a monthly amount that you can use to pay whatever financial commitments you have. This will last for a period of up to 12 months, although there is the odd occasion when the payments may be made for up to 24 months, in the case of certain redundancy insurances. However, there are certain exclusions where the policy may not cover you, so you should be aware of these.

What Isn’t Covered

Although a payment protection plan is a fairly comprehensive insurance cover to have, there are some exceptions to it. For example, if you’re self-employed, redundancy cover is different from someone who is in full-time employment and loses his or her job. You have to have stopped trading altogether to claim – you can’t claim if it’s just a quiet period in your particular line of work.

Even if you are in full-time employment, voluntary redundancy does not count towards you being able to claim unemployment insurance – since this is a choice you have made instead of being made unemployed, any claim would be void. If you’re unsure of what is and isn’t covered, check with your insurance advisor. Not only will he or she be able to explain payment protection in more detail, they will also be able to make sure you choose the best deal for you.