Payment Protection Insurance on Credit Cards

Credit cards are offering a relatively new product to their consumers. In fact it is just in the last two years that this payment protection insurance has been offered at a high rate. In Ireland they are not seeing the effects as greatly as other countries regarding the payment protection insurance due to the low number of card holders. All the same, it is imperative to understand what the protection insurance is.

Payment protection insurance covers the cardholder in the event they lose their job, take ill, or have an accident that restricts income. Depending on the credit card company you could be covered for one month to six months, for a ranging amount. The amount is set based on risk and the credit balance. Basically what will happen is the company will suspend your monthly payments until a certain date. They will also offer a certain amount of money to be paid in place of your income. This amount is covered under the insurance, but the terms are murky regarding the payback that might need to occur.

In fact the whole policy of payment protection insurance is a little murky. The credit card companies, when you call to ask them a question, will try and offer you the payment protection insurance. They will gloss over the terms and state that they are sending you the information via mail. What they don’t tell you is that if you listen to their information and agree for the information to be sent you are actually agreeing to be signed up.

There have been a significant amount of complaints regarding the process around the world, especially in the UK and the US. These complaints will soon change the practices of how the insurance can be credited to your account. For now it is something that all individuals should be wary of.

The payment protection insurance is a few Euros a month, but that adds up on top of the interest rates you are being charged. Surveys have also showed that 80 to 90 percent of the individuals enrolled in the programme never need the coverage. They have other means of protection such as work benefits to cover the loss of job income.

Another con to the whole protection insurance is the company itself. The credit card companies only have one insurance company providing the protection insurance. For example MBNA has a specific company they deal with, as does the Bank of Ireland. These insurance companies are not in competition with each other. With a lack of competition the insurance is actually more expensive than it needs to be.

On all sides it does look like a bad predicament to be in. There are some reasons why you might want the payment protection insurance though. If you work from home and don’t have other insurances it can help to support you. Having the insurance can also be something to lower your stress regarding the payments in the event of a lost job or other issue.

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This entry was posted on Sunday, August 24th, 2008 at 11:15 am and is filed under Credit Card Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.