Most people would not buy a new car or a sofa if they thought they would be out of work in two weeks. Redundancy or illness, however, can blindside a person and leave him or her in debt, unable to make the regular payments that are needed to keep a home or vehicle. There are a few types of payment protection insurance which are designed to safeguard consumers against the financial consequences of sudden hardship, although these are controversial.

Credit Card Coverage

Specific credit card companies each offer their own style of coverage. Their rates and certain details might differ, but essentially they are the same. If there is a balance remaining on your card and you are suddenly unable to pay it, your insurance policy guards you against repossession.

Mortgage Payment Insurance

Mortgage experts point out that there is a difference between mortgage insurance and mortgage payment insurance. If you take out the former, this amounts to a life insurance policy. If a mortgage held by a husband and wife is still outstanding but one spouse dies, the mortgage will be paid off by the lender. When the latter policy is taken out, this protects a home owner’s ability to make mortgage payments in the event that he is made redundant or loses his job for some other reason covered by the policy. Only mortgage payments will be covered.

Conditions

For insurance on payment protection to work, the client has to have endured one or more of several types of crises. He might have lost his job or lost a limb. He could need to take a medical leave of absence. Disability or illness might cause the policy holder to give up a job indefinitely. Being unable to hold down a job owing to unethical behavior is not a qualifying condition.

Payment

Payment protection insurance, as with any policy, requires monthly payments which might seem like a waste of time to the average individual. Hardly anyone imagines he or she will be out of work next Tuesday, or that an accident will prevent a return to the workplace.

These policies also come with a maximum. They are not there to bail a person or family out in the long run. They provide a stop gap so that clients can find alternative ways to get back on their feet.

Moreover, they are specific. While the credit card debt will be paid off, this does not mean new debt is covered, or that you will be able to use this method to cover utility bills. The same can be said of protection for payment of mortgage. If you have a new car in the drive, but are in financial disarray because of a devastating change in your circumstances, your mortgage coverage will not protect you from losing your vehicle.  You need a separate policy for that.

Policy Providers

It is a good idea to look at independent brokers to see what types of policies and prices they can offer. These might be more competitive than those offered by a private company or car dealership. While it is easy to do your shopping all in one place, buying your coverage insurance from the car dealership is like arranging for a loan there: neither would be a financially wise move. Usually, it is best to look after these kinds of things at your local bank where rates are typically competitive, and you already have a relationship with banking staff.

Problems

It is not unusual to encounter situations where there are complaints from customers who signed up for policies, or thought they had. Certain customers discover that their coverage is limited in ways they never thought possible. Most of the information is available to the customer, but the old adage applies here: buyer beware. Make it your job to carefully read all the details and take your time before signing your name to a policy. If, for instance, you have an existing heart condition and then have a heart attack, leaving you unable to work, this will disqualify you from receiving any insurance money. There are other little potholes that people catch their financial feet in, but not always. A well considered purchase can save a person’s neck in a time of trouble.