Is payment protection worth it?

[throughDarkness]

According to a leading Irish bank you should get payment protection on a loan because...

"Why protect my loan?

Payment Protection on a personal loan means that you don't have to worry if you can't make repayments
Cover includes accident/sickness, redundancy, critical illness, permanent disability and death
For example, if you can't work due to accident or sickness, your repayments are met on a monthly basis until you return to work or until the loan is repaid in full (subject to maximum monthly payment of €1,900)
If you receive your salary when you're sick, your Payment Protection policy will still cover your repayments, leaving you with additional funds to cover medical expenses, etc.
Similarly, if you're made redundant, your loan repayments are met until you return to work, or until your loan is repaid in full (subject to maximum of 12 monthly payments, and a maximum monthly payment of €1,900) "

In reality though...it looks like peace of mind. If I lost my job tomorrow I'd go take a job in a shop, or in a factory. Anything until I could get another decent job.
What do people think? Is it a waste of time for peace of mind? One of those insurances that you're never likely to need? Or is it worth it for the relatively small amount you pay?

 

[ClubMan]

As with any insurance, you need to check the detailed terms & conditions of the policy document to be sure about the circumstances in which such cover will/will not pay out and for how long. Some policies may have severe restrictions on payout and limits on how long they will pay for (in terms of individual claims or cumulative claims). As ever you need to consider these, and then consider the risk of needing to claim on such insurance in order to get a better idea of whether or not it represents good value in your individual situation. You should also pay careful attention to the charges/commissions levied on such products and whether or not more general and all encompassing (e.g. permanent health insurance, salary protection insurance etc.) might represent a better deal all round compared to individual policies locked to individual loans. In short - no easy answer.

 

[daltonr]

What do people think? Is it a waste of time for peace of mind? One of those insurances that you're never likely to need? Or is it worth it for the relatively small amount you pay?

Although all generalisation are bad, I'm going to make one now and say that all payment protections policies are bad.

It may not be fair, there may be some good policies that help some people. But if it was a roulette wheel the good policies would be the green sections of the wheel.

Payment protections in itself is bad enough, but some of the scams associated with it should be illegal.

E.g. One Direct telling you that the payment protection premium is e.g. €25 per month. Over 60 months that's €1500.
But, rather than take €25 euro per month, they instead loan you the full €1500 spread over the 60 months, so you're paying interest on the 1500 you "borrow" for the payment protection.

To make it worse, if you cancel the payment protection, or pay off the loan early, the complication of having "borrowed" the 1500 means you don't simply stop paying for the protection, you've got a hefty interest bill to meet.

When in doubt leave it out.

I now need to hear a very very compelling argument to convince me to buy any form of insurance that I'm not legally obliged to hold. A policy that has served me well so far.

-Rd

 

[throughDarkness]

Thanks guys. You're both right, I think. My own feelings would be somewhat along the lines of daltonr's so I think I will leave it out.