Most people sign up for a wide range of financial protections that make them feel secure. These include auto insurance, homeowners insurance, and AD&D insurance policies, among others. These protections are triggered in the event of an accident or tragedy. But one of the safeguards that fly under the radar is payment protection insurance, also called debt protection coverage.
When people lose a job, suffer a disability, or cannot earn a weekly paycheck for other reasons, loan and credit card bills can accumulate. That’s largely why many consider payment protection insurance plans to bridge financial challenges and avoid falling behind.
How Payment Protection Works
Payment protection plans rank among the optional services local lenders and credit card companies offer. These programs generally allow borrowers to postpone making minimum loan or credit card payments during periods of economic disruption. The circumstances usually involve losing a job or being unable to work due to a disability or illness. In the event a loved one dies, a payment protection insurance plan may include a death benefit that effectively cancels the debt.
In many cases, a payment protection insurance plan involves the borrower paying a low monthly fee in exchange for not making payments during a crisis. It’s also essential to understand that these programs require applicants to meet certain thresholds. Payment protection plans can prove invaluable when someone is facing financial adversity. By conducting some due diligence, loan recipients and credit card users can make informed decisions on whether or not to enroll.
#1: What Does Payment Protection Insurance Cover?
It’s essential to understand that payment protection programs differ between lending institutions. Some offer short-term benefits, while others provide extended plans. The criteria for leveraging the benefits may also be significantly different. That being said, there are commonalities regarding what is usually covered. These may include the following.
- Involuntary loss of a job or income.
- Total disability.
- Death.
The criteria involved in qualifying for payment protection benefits may disqualify certain claims. These often involve issues such as quitting a job, not revealing a pre-existing condition, or failing to maintain employment for a designated period before requesting payment protection insurance.
#2: What Are The Qualifications To Use Payment Protection?
The qualifications for payment protection remain relatively low by comparison to other forgiveness programs. Applicants generally must demonstrate they are gainfully employed for a steady period. Documentation of income, including self-employment, is usually required. Health history involving things such as smoking cigarettes may also be part of the qualification process. Although such habits may not necessarily disqualify applicants, they may affect coverage and costs.
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#3: Is Payment Protection Optional?
The short answer is usually: Yes. Many credit card companies and financial institutions offer payment protection plans as optional services. These low-cost plans are designed to protect things such as car loans, mortgages, lines of credit, and other personal loans.
#4: What is the Maximum Coverage Amount?
The maximum allowable benefits are determined in conjunction with the lender. Monetary limits are usually linked to specific loans or based on the borrower’s qualifying monthly average income. Along with applicable funds, set time limits may also be included to bridge financial setbacks.
#5: What is the Cost of Payment Protection Insurance?
To say the cost of securing a payment protection plan is nominal would be something of an understatement. Many of these programs offer borrowers ongoing coverage for less than one dollar for upwards of thousands in monthly bill benefits. When securing a personal loan, auto loan, mortgage, or revolving line of credit, the fees associated with payment protection seem barely noticeable.
#6: Do I Need to Decide if I Want Payment Protection Today?
There are two ways of looking at making an informed decision about payment protection benefits. Borrowers are not necessarily tasked with deciding when signing off on a loan or line of credit. But the risk of procrastinating could have negative consequences. Once someone loses a job, falls ill, or needs to take a family leave to care for a loved one, payment protection insurance plans may not be available.
Keep in mind that applicants must qualify by demonstrating steady employment. Signing up after an emergency occurs is not a viable option. Although borrowers certainly can wait, it’s generally not a good financial strategy if you believe such plans are beneficial.
#7: How Do I Make a Claim?
Financial institutions and other lenders that offer protection plans can usually be contacted directly about processing a claim. People facing a financial shortfall can anticipate customer service professionals providing trusted guidance and details on the next best step. Common items that may be required include a letter from a treating physician, loss of job paperwork, or documentation of a qualifying event. Many claims can be seamlessly processed online.
How to Get Payment Protection Insurance
Enjoying the security that comes with enrolling in a payment protection plan requires only a modest effort. Typically, local lenders offer protection plans alongside the approved loan paperwork as an additional option.
If you’re considering applying for a new loan or thinking about adding payment protection to an existing loan, contact Peach State and ask about our debt protection options today!
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