Should I take out payment protection?

I have a few loans and I am thinking of taking out payment protection to cover them and my other monthly expenses in case I am off work sick.

Question asked by Helen Young
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Answered by Andrew Jenkinson

PPI vs. Income Protection

Payment protection insurance (PPI) was originally designed to cover the repayment of a loan against accident, sickness or unemployment. There are several limitations and shortcomings of the product.

It is a short term cover- policies pay out for 12 months

Policies are renewable annually so premiums could increase.
A major issue is that PPI insurers often only provide suited occupation cover. This means that if you are unable to work in your current role they would look to see if you could perform another role for which you are qualified.

PPI insurers don’t typically publish their payout rates.

We recommend that people take out income protection as opposed to payment protection as it is a more comprehensive plan. This is designed to cover your earnings if you are unable to work due to injury or illness. You can cover up to 70% of your gross income so it can be used to cover your monthly expenses. Unlike PPI, policies are underwritten upfront so you know what is covered before you start paying the insurance. Some plans also the option to add unemployment cover.

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Please feel free to give us a call on 0208 432 7333. One of our advisers can run through your options and provide you with quotes from across the market.

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This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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Victoria
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