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Insurance against inability to meet repayments

If you have taken out a loan this will impact you financially. Payment protection adds peace of mind by allowing you to come to an agreement with your lender regarding loan repayments and if you should miss one or two due to unforeseen circumstances.

Payment protection is also known as credit insurance and is usually divided up into two sub categories. Credit Life and Credit Disability.

Credit Life Insurance is designed to payoff the insured balance of your loan should the worst happen and you die. Credit Disability Insurance is designed to pay your loan repayments if you should suddenly become ill or disabled which would limit you in your working capabilities, or if it meant you were no longer able to work.

Payment Protection is easy to purchase and is often offered at the time of agreement. There are however a few eligibility requirements. They include age: you must be between 18 and 65 or perhaps higher in some cases. Another requirement is that you must work 16 or more hours a week. Most if not all policies have a period of time in between which the claim was made and the payment starts. Claims are usually paid up to 12 months but some may last as long as 24 months.

Here are a few reasons why payment protection is important:

Reduction in state help: The level of State benefit has reduced since 1995. There is now a nine month and perhaps longer wait along with tighter restrictions on benefits. Payment protection provides extra cover, which could help you keep your home.

Prospect of redundancy: According to government statistics three quarters of a million people were made redundant between 2002 and 2003, which works out as 3000 people a day. As many as 1.5 million people were claiming benefit during that time.

Insufficient savings: Around half the UK population has less than £600 savings and are more than £200 in debt. As a nation we are well over a trillion pounds worth of debt.

Accidents: Over 320,000 people were killed or injured on UK roads in 2000.Nearly 3 million people suffered injuries at home in 2000 that warranted a visit to A&E. Over 47,000 employees suffered major injuries at work in 2001, with 736 resulting in death.

Illness: Four out of ten people will be diagnosed with cancer at some stage during their lifetime. Heart disease will kill one in four men and one in six women and remains the biggest killer in the UK. Someone suffers a heart attack every four minutes.

Payment protection is certainly something that you should give serious consideration to, especially if you have no-one to fall back on financially should the worst happen and you are unable to meet the repayments on your loan.