Finance Wanted.

By Simon Lance Burgess

Payment protection is a set of insurance policies that can be taken out to safeguard against a range of outgoings you have to make each month. There are three policies, loan protection, mortgage protection and income protection. All three can be taken out to ensure that you would have the income needed each month to be able to continue paying out what you owe to lenders.

Income protection insurance would allow you to protect up to a certain amount of your own income each month if you should become unemployed for no reason of your own. It would also give you a replacement income if you should fall ill or suffer an accident that meant you were unable to work. You are able to cover a certain amount of your own income each month and then if you need to you can put in a claim after a certain amount of time. With income protection you would not have to worry about finding your mortgage repayment each month or any loan outgoings you have to keep up with. You would also be able to continue paying any other essential outgoings and not have to decide which bills to put off until later.

Payment protection can also be taken out as a policy just to cover your mortgage each month. If you are worried that at sometime during the repayment of your mortgage you might become unemployed or incapacitated then you can cover up to so much of your monthly mortgage repayment. This would allow you the peace of mind that you would not get behind and into arrears so would not be at risk of losing your home. Mortgage protection can be taken out to cover against all three eventualities or you could just take out cover for incapacity only or unemployment only.

Loan protection is also available as a standalone policy and this would do the same for your loan repayments. You would be able to receive a tax-free income each month you were out of work or unemployed which would pay your lender. It is important to keep up with your loan or credit card repayments if you do not want to risk earning yourself a day in court and possible a Count Court Judgement. At the very least you would get a bad mark on your credit rating which could take many years to clear and during this time being approved for a loan would become very hard.

All types of payment protection will begin to provide an income after a certain period. This is usually between 30 and 90 days of becoming unemployed or of being incapacitated. Some providers will backdate their policies to day one of you becoming unfit or unemployed, so check the terms and conditions of the policy before taking it out. Once the cover has started to provide you with an income, it would do so for a certain length of time and then it ends. Usually policies are offered that would protect you for between 12 and 24 months.

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of payment protection.