I am always torn when I have to decide whether or not to partake in a payment protection insurance plan. This option sometimes comes up when I am financing a large purchase, like buying a home or a car. The breakdown of what the plan provides is really quite simple. If I am unable to make payments on the insured financing, the insurance plan makes the payments for me for up to a year in most cases.
Why would I be unable to make payments? I could loss my job. Or I could suffer an accident. I might even die, and my family would not be able to afford the payments for the home or car.
Getting a payment insurance plan is sometimes a tough call. On something like a television or a washing machine, I usually do not bother. I would happily return the merchandise in question and live without. However, for something as important as my home, I have to think twice and I usually pony up and pay the money for the insurance plan. 12 months is usually long enough to get back on my feet, and my thinking is that if something happens, I would want to keep my emergency savings intact as much as possible for all my other expenses. So, draining them for mortgage payments makes little sense to me.
In a way, I know that I am in fact paying money to protect my savings account, instead of just saving the money. But I have enough to do this, and the peace of mind is worth it given how well I sleep at night. I usually do not do it for luxury items like my boat, which I could sell if I had to in an emergency year. But for my primary vehicle and my home, it is an investment in peace of mind.