Payment protection insurance covers policyholders when they become redundant or are unable to earn a living due to sickness, job loss, accident or death, states Barclays. Payment protection insurance ensures repayment of loans mortgages, store cards, credit cards and overdrafts for a short time, ensuring individuals are able to meet their payments, explains the Money Advice Service.
Payment protection insurance only covers the specific debt defined in the policy, such as an existing overdraft. Once an individual makes a claim, the insurer pays off the loan, and the policyholder cannot divert the funds to other uses, clarifies the Money Advice Service. In case of credit cards, payment protection insurance only covers the minimum repayment for a defined period, which may not sufficiently cover the outstanding balance.
The plan covers circumstances that prevent policyholders from working, such as caring for an elderly or sick family member. Payment protection insurance does not cover the initial 90 days following job loss or involuntary unemployment, compelling the holder to pay off his loan using other means. Individuals with pre-existing medical conditions are ineligible for the coverage, as are the unemployed, details the Money Advice Service. Contact an insurance firm or financial adviser, and inquire about the details of the policy and the alternatives available prior to signing up.