FinanceDogma – Finance, loans, creditcard and mortgages

January 27, 2013

Should I take out PPI?

Filed under: insurance — Tags: — admin @ 12:12 am

Whether you should take out payment protection insurance can be a more difficult solution than it may seem. You may think that all PPI is bad and it should never be considered. It is not surprising that people do have this attitude in light of all the PPI scandal and PPI claims that are being made at the moment. However, they are not happening because there is something wrong with PPI but only the way that it was sold.

So if you have any sort of a loan, then you should consider whether you want to take out payment protection insurance. You should consider whether you would like to cover the risk of not being able to make your repayments. The policies do vary so you need to think if you want help if you are unwell, can’t work or whatever and make sure that the policy covers you for this.

It is worth considering how much the policy will cost you for the duration of the loan. Think about how much money you will spend in total and decide whether you think that this will be worth it. It is worth considering what else you could spend that money on as well as the likelihood that you would need to make a claim. Some people like the peace of mind that it gives them and would rather pay the money for that. Others are happy to take the risk, perhaps because they have savings they could use to cover the repayments or another income coming in to the household which would help.

Each person is different in how secure they feel and how much risk they want to take. It will also depend on the loan. If it is a mortgage and your house will be repossessed if you cannot keep up repayments due to losing a job, then you could be left with nowhere to live. However, you may feel you have enough money to cover a few months, you feel the bank would be happy to negotiate a few payment holidays and you have another income to help out with the household bills. However, if you are solely responsible, have family living in the house and no savings, then the idea of having the house taken away could be a lot more scary.

So it is worth thinking about your own personal circumstances when considering PPI rather than worrying about things that have happened to other people in the past.

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