When you first started trying to find out if Payment Protection Insurance (PPI) was something you wanted or needed, you may have felt like you needed a certification in insurance sales to answer the question. You don’t.
Although PPI can seem complicated and difficult to understand, it doesn’t have to be. Payment Protection Insurance is simply insurance that covers your loan payments if circumstances don’t allow you to cover them yourself. PPI is most often sold alongside mortgages, allowing the buyer to receive assistance in covering monthly payments in the event of illness or an inability to work.
The cost of PPI varies and is based on the amount of the loan. Most often, the premium is rolled into the monthly payment. PPI can be a good and beneficial thing. Carrying this type of insurance can offer you the security that if something were to happen that made it impossible to pay your mortgage, you would file PPI claims and avoid facing foreclosure or other financial ruin. However, it is important to realize that PPI is and should be voluntary. It is a purchase you choose, not one that is chosen for you. Some lenders are now requiring PPI coverage as a condition of approval. Know what is and what isn’t in your loan agreement.
