Payment Protection Insurance: What Is It and Do You Need It?

The average person has several types of insurance to protect them in different stages of life. Health insurance will protect their bodies and finances in a medical emergency, life insurance provides for their loves ones and auto insurance ensures that you won’t need to pay huge bills if your car is in an accident. If you are a business owner, however, you may need to invest in additional types of insurance to protect your family, your company and your finances. Read on to better understand payment protection insurance, who should invest in it, how you may be paying for it already and why it is especially helpful for the owners of small businesses.

What is Payment Protection Insurance?

Payment protection insurance, commonly referred to as PPI, is a type of insurance that you pay into each month. In the event that you are unable to work, or to otherwise earn an income, this insurance coverage will help you manage your debts until you are on your feet again. This might come in handy if you have to close down your business due to a serious surgery, if you have an emergency that prevents you from working or otherwise have an incident that prevents money from coming in. However, it is important to note that this is a short-term arrangement, and coverage will typically only cover bare minimum or interest payments.

Who Should Invest in Payment Protection Insurance?

There are a number of different people who should invest in payment protection insurance. This includes anyone who is self-employed, someone who has bad health or someone who can’t afford health insurance due to preexisting conditions. Payment protection insurance is ideal for someone without a substantial amount of savings, or for someone who does not own their own home. It is usually not necessary for someone who could mortgage their home or sell valuables in order to get by in a period without income.

Are You Paying for Payment Protection Insurance Already?

Most people invest in payment protection insurance when they take out a major business loan. Check the fine print to find out if you have already signed up for this without realizing it, as many banks and credit unions will encourage business owners to pay for this when taking out a loan. This guarantees that banks will see a return when they lend money, despite the fact that 34 percent of new businesses fold within two years of existence.

Deciding whether or not to invest in payment protection insurance is a major decision for every business owner. Financial expert David Rowley says, “PPI is smart for anyone with large amounts of debt and no substantial savings.” It can help prevent against bankruptcy and may make sense if you own a small business.

Lisa Day is a guest writer for ppiclaims.uk.com where you can find information on mortgages, interest rates and special financing savings.