What is Payment Protection Insurance?

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  • Written By: Charity Delich
  • Edited By: Bronwyn Harris
  • Last Modified Date: 30 October 2019
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Payment protection insurance, abbreviated as PPI, is a type of insurance that is designed to cover outstanding debts. Typically, the insurance is taken out when a person secures a loan or overdraft, like a mortgage, credit card, or car loan. If the borrower is unable to pay the loan as a result of an accident, sickness, death, or layoff, he or she can file a payment protection insurance claim. Depending on the policy, the insurance company may cover all or a percentage of the loan payment for a certain period of time. Payment protection insurance is sometimes also referred to as credit protection insurance; loan repayment insurance; account cover; or accident, sickness, and unemployment (ASU) insurance.

Payment protection insurance can be obtained from a couple of different sources. Most lending companies offer the insurance in conjunction with the loan. For example, if a borrower takes out a home mortgage with a bank, the bank usually offers the borrower mortgage payment protection insurance as an add-on product. The borrower could, however, also obtain the insurance directly from an insurance company. When taking out protection insurance, a borrower should shop around to determine which deal is best for his or her situation.


Most protection insurance is provided for a limited period of time, usually between 12 and 24 months. After that time, the borrower is responsible for resuming debt repayments. There are several categories of loan payment protection insurance available to borrowers, including insurance for mortgages, credit cards, loans, and income.

Mortgage protection helps cover monthly mortgage payments in order to prevent homeowners from losing their homes in the event of an accident, sickness, death, or unemployment. Credit card payment protection insurance covers outstanding credit card payments for a period of time. In some cases, the insurance company will pay off the entire balance on the card. In other cases, the insurance company only covers the minimum monthly payment. After the insurance no longer pays out, the borrower is responsible for paying the remaining balance on the card.

Loan protection covers a variety of different loans, such as car loans and personal loans. Some of these products include an element of life insurance. In this case, the insurance company will usually pay the remaining balance on the loan if the policyholder dies. Loan protection often covers repayments for the remainder of the loan in the event the policyholder becomes disabled and unable to work.

Income payment protection insurance generally provides a steady stream of monthly income if the insurance policyholder becomes unemployed or incapacitated. While most policies do not cover the policyholder’s full salary, they frequently cover the majority of it. The amount provided each month depends on the terms of the specific policy as well as the policyholder’s income before the job loss or incapacity. Coverage for unemployment is generally only provided if the policyholder becomes involuntarily unemployed.


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