The most critical twist in the life of a mortgage borrower is when he is suddenly rendered jobless. The anxiety of paying monthly mortgage repayments can make the situation intolerable. However, we are fortunate to live in an era, where options like Payment Protection Insurance (PPI) exist to suggest a way out of such unanticipated situations.

The PPI buyers are required to pay a monthly premium and get rid of mental trauma caused by inability to pay mortgage repayments due to circumstances like sickness, accident and even death. But, keep in mind the fact that these insurance policies are expensive and thus must be avoided in situations like:

• Alternative health insurance cover available.
• Availability of huge savings.
• Financial assistance offered by people in social contacts.

Some Points of Consideration

Make sure you purchase right PPI to meet your requirements. For instance, people facing problems in running their own businesses may find unemployment aspect of these policies to be useless.

The choice of lender for purchasing this policy can influence its utility for weeding out your problem.

Always check the hidden costs associated with these insurances. Some lenders may try to befool you by offering cheap loans, but expensive insurance rates.

While signing the deal for standalone PPI, make sure you have gone through all the clauses and unchecked the boxes asking for borrowing of loan.

Evaluate the terms and conditions of the policy for tangibility of the reasons for losing your job.

The lenders offering loans at high interest rate and insurances at lower interest rate are certainly better than those offering low interest rates on loans and expensive insurance rates. Thus, make sure you don’t go by the initial baits offered by tricky lenders in the form of low interest rate loans.

Basis of Choosing PPI

Type of cover you want to avail to bring down the cost price of PPI policies. For instance, choose wisely for accident and/or sickness and/or unemployment and so on.

Period for which benefits are offered – Most of the insurance providers offer benefits after 30-60 days of start of problem. However, you can find out one offering benefits from day one.

Finally, if you choose to switch from an expensive PPI to that offered at lower interest rate; don’t forget to assess all associated costs and benefits. The only way to become a successful policy holder is to extract maximum information about the policy.

By Nancy Dodds of Financemate.co.uk