Payment Protection Insurance

Payment protection insurance is a standard add on feature for many large dollar loans such as car loans, mortgages and other large bill obligations that could become a true nightmare should a disability or death occur. This financial security is formally referred to as PPI by the financial world, but can be sold under many other monikers such as accident, sickness and unemployment insurance or income protection insurance. In any case, this plan can offer a true measure of security for those who have grave reservations about how a large debt would be paid should a disaster strike. Any person with a small savings reservoir or someone heavily in debt would be a prime candidate for such a safety-net plan. Making sure that a plan is sound and customer friendly remains the responsibility of the buyer.

These plans, are usually broken down into two categories, credit life and credit disability are usually not long term solutions. In fact, they are more of a bridge or transition answer to help with immediate needs. In most cases payment protection insurance, if it is credit disability security, is only good for twelve to twenty four months in length. The plans are for short term health related disability, and in some cases stretches of unemployment that may occur. But though the security is nice to have, the payment protection insurance is not cheap.

The financial security plan which is under discussion here is offered by many online companies. But since their main interest is making money the monthly price tag can be off putting. Typical rates for disability payment protection insurance can run as much as thirteen or fourteen cents per one hundred dollars of an outstanding loan. Consider for a moment the offer that a car dealer makes to a customer on a twenty five thousand dollar new car. It certainly is standard mantra for the finance manager to push the customer to add this payment protection to the cost of the car, and of course, it just becomes part of the monthly payment. As an example, credit life to cover the balance of the car loan will pay for the entire loan in the case of the borrower's death at the cost of five cents for every one hundred dollars borrowed. For additional money, credit disability security can be purchased at about thirteen cents for every one hundred dollars of the loan.

So let's do a little math to see how much this protection will actually cost. The payment protection for the credit life will be a mere twelve dollars and fifty cents a month for the life of the loan. Based on a forty eight month payback, this protection will cost only six hundred dollars of extra payments, much of which often goes into the pocket of the car dealer. Now the disability insurance portion of this deal is much higher. The cost to be covered in case one falls off the roof and can't make the car payment for three months is fourteen hundred and forty dollars or thirty dollars a month. But the prudent and wise thing would seem to be putting that extra thirty dollars a month into a rainy day fund and pulling from it if needed for that roof fall instead of letting a car dealer make more money. And speaking of the credit life part of this payment protection insurance thing, isn't that what a good life insurance plan is for, so why pay for two life premiums?

Since all the cost of payment protection insurance is based on age, one might be more inclined to believe that for the single or newly married couple just starting out, perhaps this insurance might be a good idea. One can only advise that all factors be weighed and numbers be crunched to obtain enough information to make a good decision. All throughout life, we will always have people tell us that things that are bad for us are really okay, and that our right to do things is more important than whether they are inherently good or evil for society. God has very harsh words for the purveyors of rose colored values when he says, "Woe unto them that call evil good and good evil; that put darkness for light and light for darkness; that put bitter for sweet and sweet for bitter." (Isaiah 5:20)

Americans end up paying a lot more for their purchases when strong financial plans are not in place. For example, why pay six hundred dollars more for credit life to cover a car loan when a good term life insurance policy covering several hundred thousand dollars of debt may be available for the same price? Credit life insurance is at an all time low price wise and shopping around can get someone a much better dollar for dollar deal than paying for high priced niche payment protection insurance. And when it comes to buying that credit disability payment protection insurance, why is anyone buying something so big that savings won't cover the loan cost for a few months, or even twelve months? Could it be that the purchase really isn't needed and that someone really should have a more substantial savings account for those unexpected issues? Think of all the hands that are outstretched to take our money because of unwise purchases we make and the desire to have more than we can afford.