Debt Insurance
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Filed under Credit Reports
A debt insurance policy ensures that a policyholder is able to repay his/her monthly installments on mortgages, loans, credit/store cards or catalogue payments if s/he is unable to work and earn. The insurance, also called Payment Protection Insurance (PPI), covers inability to work in case of:[br]
- An accident or sickness
- Unemployment for no fault of your own
- Death
With debt insurance, your insurance company ensures that your monthly repayments against loans or overdraft continue for a definite period, which is typically 12 months. This period is usually considered long enough for people to find a job and start repaying their debt liabilities.
Key Limitations, Exclusions and Features of Debt insurance
Debt insurance policies could include the following features:
- This policy is optional and there is a very low probability of a loan provider refusing to issue you a loan if you decide against buying the policy.
- PPI ensures loan repayment for only a specific period of time.
- Several policies may not start paying your loan obligations for the first couple of months after a claim is made. Thus, you would need to cover the repayments via an alternative method during these initial months.
- To be eligible for a debt insurance claim when you become unemployed, you need to be on the permanent payroll of the same company for the past 12 months.
- Several policies may not cover self employed people. If you fall under this category, check carefully if the policy covers people in this group.[br]
- If you have a preexisting medical condition at the time of buying a policy, you may not be able to make a claim for that ailment. Ensure that the policy you are buying covers all of your preexisting medical conditions, including those that have not troubled you for a while.
- Some policies do not cover back complaints and stress as reasons for your inability to work. If you are prone to these problems, verify that the policy you are taking covers this.
- You have a legal right to cancel the policy and get a full refund within 30 days of taking it out.
Since features and limitations of debt insurance policies may vary with providers, it is best to shop around and verify with the provider on all the features you want in your debt insurance.