Payment protection insurance is a type of insurance marketed by Banks and Financial Institutions when we contract a personal or mortgage loan that provides us with the necessary coverage to face your payments due to lack of income as a result of temporary disability, unemployment or death.
Everything you need to know about protection insurance
- Why are credit institutions interested in hiring payment protection insurance?
- What does loan or payment protection insurance cover?
- How much does payment protection insurance cost?
- Hiring a payment protection insurance, where to go?
- Conclusion and recommendations
Why are credit institutions interested in hiring payment protection insurance?
It is usual for the Credit Institution with which we contract the debt to offer us the option of subscribing to payment protection insurance linked to our loan, under the agreement to improve our financing conditions.
The Financial Institution with which we sign the loan is interested in our availing of this insurance that offers us payment coverage in situations in which we stop receiving income. In this way, recurring payments are guaranteed in situations of economic difficulty.
What does loan or payment protection insurance cover?
The payment protection insurance provides us with sufficient coverage to amortize the payments of the installments of our loan in the cases stipulated in the policy contracted with the insurer, which generally accepts the situation of unemployment, temporary disability or death.
Before signing the insurance policy, we must pay attention to the conditions and coverage it offers us. It may happen that the contracted coverage is not what we need and we are not aware until we need to resort to it that we are paying for insurance that does not meet our expectations.
Payment protection insurance assumes the payment of an amount (part or total of the mortgage installment) during a period of time stipulated in the contracted policy, in case of unemployment or temporary disability.
Unemployment coverage is responsible for paying the installments of the linked loan if we lose our job.
To be able to contract this insurance coverage, we must be indefinite workers or permanent discontinued workers. In the event that we have other types of temporary contracts, or contracts for works and services, insurers will consider that we are not suitable to contract this coverage.
It is advisable to pay attention to the clauses of our policy since situations such as the appropriate dismissal, a dismissal without the right to stop, or a resignation would not be considered insured and in case of losing the job for any of these reasons we would not be protected.
Coverage in a situation of incapacity for work
Coverage in a situation of temporary disability is responsible for the payment of the installments of the linked loan when we are sick or suffer an accident that renders us incapable of performing our usual functions, due to medical leave ruled by a Social Security doctor with the exception of the low for maternity.
How much does payment protection insurance cost?
The cost of payment protection insurance or loans varies depending on its amount and the maximum time it covers us. Factors such as the period of validity of our mortgage or loan that we insure, its capital, our age at the time of contracting, or if we decide to pay it in a single premium or monthly premium also influence.
Predictably, the cost of the premium will be higher the higher the amount of the fee we want to cover. The maximum quota limit that we can contract with this insurance ranges from 12 consecutive months or up to 36 non-consecutive alternate quotas.
Hiring a payment protection insurance, where to go?
In the event that we are interested in contracting payment protection insurance, we should know that although this service is usually offered by the financing entities with which we contract our debts, there are other alternatives that we must assess before making any decision.
The most important banks specialized in payment protection insurance are entities such as Cream bank or Infra Bank.
Conclusion and recommendations
The payment protection insurance marketed by banks and savings banks at the time of contracting a loan to ensure coverage of payments, is a linked product that although beneficial for the client, if we do not pay attention, it may not fit to our needs.
It is advisable not to get carried away by the banks’ recommendations without first comparing the insurance offer in other companies in the sector specialized in contracting insurance.
Read carefully the clauses of the insurance policy that we contract, to make sure that our policy includes what we need. In many cases insurance companies are restrictive and it is not usually easy to collect this type of insurance, so it is recommended to pay attention to aspects such as the lack and period of validity of the insurance.
In the event that you have doubts regarding insurance coverage, before hiring, it is advisable to ask experts for advice to negotiate the insurance conditions for us