Why is payment protection insurance important?
Payment protection is designed to help pay your financial commitments in the case of accident, sickness (Disability) and unemployment. These circumstances have been proven to cause financial hardship due to a reduction in income, making it difficult to maintain payments on mortgages, loans and credit cards. Here are just a few reasons why payment protection is important
Reduction in State help
The Prospect of redundancy during uncertain times
People are borrowing more
Savings are often insufficient
Accidents do happen
Ill-health can be a problem
Reduction in State help
The level of State benefit has reduced for mortgages taken since October 1995. Borrowers now face a nine-month wait before benefit begins and even then there are additional restrictions and you may only receive limited assistance. Payment protection insurance provides a useful safety-net and could help you keep your home.
The Prospect of redundancy during uncertain times
According to Government statistics, 755,000 people were made redundant in the UK between June 2002 and May 2003 - the equivalent of over 3,000 every working day. There were also, on average 1.5 million people claiming unemployment benefit during that time. A payment protection policy could have helped many through a financially difficult time.
People are borrowing more
Bank of England figures show that people are relying on credit more than ever before. At the end of July 2004, almost �1,000 billion was outstanding on mortgages, loans and credit cards. The Citizen’s Advice Bureaux reported that the average household has debts of �10,700 (excluding mortgages) and confirmed that it dealt with well over one million new debt enquiries last year, suggesting that many are struggling to maintain payments.
Savings are often insufficient
According to the Institute of Fiscal Studies, around half of the UK population has �600 or less savings and around a quarter of the population are �200 or more in debt. In addition, nearly half of us do not save regularly and a third have no savings at all. This lack of saving could cause financial hardship in the event of accident, sickness (Disability) or unemployment.
Accidents do happen
Over 320,000 people were killed or injured on UK roads in 2000
Nearly 3 million people suffered injuries at home in 2000 that warranted a visit to A&E
Over 47,000 employees suffered major injuries at work in 2001, with 736 resulting in death
These accidents could leave people unable to work for long periods of time. Whilst some employers can help financially for a while, payment protection can help for at least a year.
Ill-health can be a problem
When in good health, may people find it hard to envisage suffering from a major or critical illness but, if you are borrowing money, thinking about this now could save financial problems in the future. Statistics from Cancer Research UK and the British Heart Foundation show that:
Four out of ten people will be diagnosed with cancer at some stage during their lifetime
Heart disease will kill one in four men and one in six women and remains the biggest killer in the UK
Someone suffers a heart attack every four minutes
