Payment Protection Insurance - Protecting Your Livelihood

Is payment protection insurance something you have ever considered? For many people there is a very real need for this innovative insurance. Even when the country is not going through an economic downturn, redundancy is still a very real threat to anyone who is full time work. No longer is a there such a thing as a "job for life" meaning that you could find yourself financially vulnerable without warning.
And add in to the equation the fact that you could find yourself off work and on a limited - or no - income, due to accident or prolonged sickness, and you can see why protecting your finances can make sense.
So what does protection insurance do?
In the event that you made involuntarily redundant or of work due to incapacity, you will receive a tax free monthly sum that can be used towards your essential repayments. The sum of money that you get back in tax free payments will be the amount you chose to protect at the time of taking out the policy. This amount will need to be agreed with the provider as all will set a limit as to how much you can claim. Typically this will be up to £1,500 a month or half your gross earned income. You will get payments each month for the term of the policy after waiting for the deferment period to pass.
When can a claim be made?
A claim can be made between the 30th and the 90th day depending on the provider you have chosen to take your protection with. Some providers might offer to date back the policy to the first day that you lost your income to one of the events insured but you will need to check in the small print of the policy you were considering to find out.
90 days can be a long time to wait before a claim can be made so you may find it a more viable option to select a policy that pays out after 30 days of unemployment or being unable to work.
The types of protection
Payment protection insurance is actually an umbrella term for several policies that meet specific needs. Mortgage payment protection insurance (MPPI) will provide an income which you could use towards keeping your mortgage repayments up to date thus avoiding mortgage arrears. Loan payment protection insurance cover will provide money towards the repayments of your secured or unsecured loan. Income payment protection will allow you a general non-debt specific income towards meeting any essential outgoings and payments.
Protection insurance can also be affordable - if you know where to buy your cover. To get the best deal on your payment protection insurance, look at the premiums offered by standalone providers and compare. High street lenders will offer protection but in the majority of cases this will come at high cost. Buy shopping around you can get source a good deal at a price that suits your pocket.
Jason Hulott is Editor of Rhino Money, the solid finance information site for UK residents, which covers topics including Insurance and Credit cards
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