Give serious thought to purchasing Payment Protection Insurance (PPI) for your major credit cards. A PPI plan pays your monthly credit card bills if you suffer long-term illness, injury, or unemployment. For just a few dollars each month, you can protect against late fees, penalties, increased interest rates, and ravaged credit.
Insurance industry analysts at MindYourDecisions.com explain, “Credit card payment protection plans offer relief when you are out of work. Your entire balance may be waived, for instance, in one of these emergencies. The cost is usually a percentage of your monthly balance, on the order of one to two percent. With a one percent fee, for example, you would pay $1 for every $100 charged. There is no fee if you don’t charge anything.”
The Benefits of Payment Protection Insurance
Naturally, you want to protect your family against financial disaster. While the global economic picture remains uncertain, you must take charge of all the details in your own domestic economy. Act aggressively to ensure you can keep your home and pay your bills even in the worst case scenario. “Even in the best climates, rainy days happen,” Will Newman, a Phoenix investment adviser, elaborates on the old metaphor. “Take precautions,” Newman counsels, “and add PPI to your family’s insurance portfolio.” Newman cites at least three major benefits from PPI:
1. PPI Supplements Your Emergency Savings
If you work in one of the economic sectors still struggling to get out of recession, you know your job remains vulnerable. In addition to increasing your value to the company, plan for surviving a long period of joblessness. Millions of Americans have exhausted their 99 weeks of eligibility for unemployment and still have not found satisfactory jobs. In addition to keeping six months’ salary in a certificate of deposit or money market account, protect your assets with PPI. Even in extreme circumstances, PPI is beneficial: for example, if you have hit the limit on a $10,000 credit card, your total annual PPI premium is less than just one monthly minimum payment.
2. PPI Fills “The Rainy Day Income Gap”
Unemployment and standard disability insurance pay approximately 60 percent of your regular salary or wages. If you budget carefully and spend prudently, you can meet your most important expenses with your reduced income; however, essential costs of housing, transportation, and food will leave you with very little left over. PPI covers other major obligations your benefits may not stretch to satisfy. Although Newman, like other experts, discourages PPI on retail credit accounts, he strongly recommends it for major credit cards from demanding lenders.
3. The Bigger Your Balances, the More You Need PPI
In 2010, major American credit card companies collected more than $35 billion in late fees, penalties, and increased interest charges. Most major lenders assess late fees even if you pay during the so-called “grace period,” and any delinquency can raise your interest rates as much as 20 percent. Because your PPI provider automatically makes your payment directly to your lender on the day it is due, you incur no extra fees and you maintain your account in good standing.
Study the Fine Print
PPI plans often have strict limits and constraints. Make sure you read the terms and conditions of your plan and ask lots of questions before you sign and pay. For example, the majority of PPI plans protect you for “up to 24 months,” and many cap maximum pay-outs, usually aligning them with your credit card limits. In other words, PPI providers assume that, while they pay your monthly bills, you will not add new charges to your balance. Although Newman concedes, “PPI is a luxury, the last among your family’s insurance priorities. PPI certainly is neither urgent nor essential.” Nevertheless he insists, “It’s a very low-cost defense against major financial catastrophe.”
Myron Townsend is a freelance blogger who writes on behalf of www.ppiclaims.uk.com, a website where you can compare payment protection insurance services and learn how to file claims.