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Insurance glossary

Payment protection insurance

Payment protection insurance provides cover for people taking on debt in case their circumstances change and they are unable to meet repayment requirements.

For example, if someone loses their job or becomes ill payment protection insurance will cover the repayment costs on a mortgage or credit card.

However, a number of commentators question the value of this insurance and point out that it can be expensive and of limited use.

An income protection policy, for example, could easily take the place of payment protection insurance policies for mortgages, credit cards, and personal loans in one go.

Payment protection insurance is sometimes required for a loan or mortgage to be taken out; where this is the case the added cost of the insurance cover must be included in the loan's APR.

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