Hard-working people sign up for a wide range of financial protections that make them feel secure. These include auto, homeowners, and life insurance policies, among others. These protections are triggered in the event of an accident or tragedy. But one of the safeguards that flies under the radar is payment protection programs. When people lose a job, suffer a disability, or cannot earn a weekly paycheck for other reasons, loan and credit card bills can accumulate. That’s largely why an increased number of people consider payment protection plans to bridge financial challenges and avoid falling behind.
How Payment Protection Works
Payment protection plans rank among the optional services local lenders and credit card companies offer. These programs generally allow borrowers to postpone making minimum loan or credit card payments during periods of economic disruption. The circumstances usually involve losing a job or being unable to work due to a disability or illness. In the event a loved one dies, a payment protection plan may include a death benefit that effectively cancels the debt.
In many cases, a payment protection plan involves the borrower paying a low monthly fee in exchange for not making payments during a crisis. It’s also essential to understand that these programs require applicants to meet certain thresholds. Payment protection plans can prove invaluable when everyday people face financial adversity. By conducting some due diligence, loan recipients and credit card users can make informed decisions on whether to enroll.
#1: What Does Payment Protection Cover?
It’s essential to understand that payment protection programs differ between lending institutions. Some offer short-term benefits, while others provide extended plans. The criteria for leveraging the benefits may also be significantly different. That being said, there are commonalities regarding what is usually covered. These may include the following.
- Involuntary loss of a job or income.
- Family leave of absence from work.
- Unforeseen illness or disability confirmed by a doctor.
The criteria involved in qualifying for payment protection benefits may disqualify certain claims. These often involve issues such as quitting a job, not revealing a pre-existing condition, or failing to maintain employment for a designated period before requesting payment protection.
#2: What Are The Qualifications To Use Payment Protection?
The qualifications for payment protection remain relatively low by comparison to other forgiveness programs. Applicants generally must demonstrate they are gainfully employed for a steady period. Documentation of income, including self-employment, is usually required. Health history involving things such as smoking cigarettes may also be part of the qualification process. Although such habits may not necessarily disqualify applicants, they may affect coverage and costs.
#3: Is Payment Protection Optional?
The short answer is usually: Yes. Many credit card companies and community credit unions or banks offer payment protection plans as optional services. These low-cost plans are designed to protect things such as car loans, mortgages, lines of credit, and other personal loans.
#4: What is the Maximum Coverage Amount?
The maximum allowable benefits are determined in conjunction with the lender. Monetary limits are usually linked to specific loans or based on qualifying community members' monthly average income. Along with applicable funds, set time limits may also be included to bridge financial setbacks.
#5: What is the Cost for Payment Protection?
To say the cost of securing a payment protection plan is nominal would be something of an understatement. Many of these programs offer borrowers ongoing coverage for less than one dollar for upwards of thousands in monthly bill benefits. When securing a personal loan, mortgage, or revolving line of credit, the fees associated with payment protection seem barely noticeable.
#6: Do I Need to Decide if I Want Payment Protection Today?
There are two ways of looking at making an informed decision about payment protection benefits. Borrowers are not necessarily tasked with deciding when signing off on a loan or line of credit. But the risk of procrastinating puts everyday people in harm’s way. Once someone loses a job, falls ill, or needs to take a family leave to care for a loved one, payment protection plans may not be available.
Keep in mind that applicants must qualify by demonstrating steady employment. Signing up after an emergency occurs will not be a viable option. Although borrowers certainly can wait, it’s generally not a good financial strategy if you believe such plans are beneficial.
#7: How Do I Make a Claim?
Community credit unions and banks along with other lenders that offer protection plans can usually be contacted directly about processing a claim. People facing a financial shortfall can anticipate customer service professionals providing trusted guidance and details on the next best step. Common items that may be required include a letter from a treating physician, loss of job paperwork, or documentation of a necessary leave of absence. Many claims can be seamlessly processed online.
How to Get Payment Protection
Enjoying the security that comes with enrolling in a payment protection plan requires only a modest effort. Typically, local lenders offer protection plans alongside the approved loan paperwork as an additional option.
If you are considering applying for a new loan or are considering having payment protection added to an existing loan, contact your local credit union or community bank for trusted advice and a reliable payment protection program you can count on.
