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Q&A: What is Payment Protection Insurance?

Since 2019, Erika Carroll, a First New York Federal Credit Union Senior Real Estate Loan Expert, has been telling members to look into payment protection insurance before winter hits.

Why? Because during the winter, people often get into more accidents and needing additional protection around their auto, home, and personal loans.

To help you understand the benefits of payment protection, we sat down with Erika to gain her expertise and learn a little bit more about how this has helped members overcome the unexpected.

Let’s dive in!

Q: What Is Payment Protection?

Erika: Payment protection is an optional service offered by credit card companies and lenders that temporarily pauses payments in case of financial hardships. These hardships can include but aren’t limited to job loss, medical emergencies, diagnosed illnesses, and death.

At First New York FCU, we offer this optional protection to our members to help them make their loan payments in case of a disability, injury, or illness. By temporarily covering your loan payments, you can free up money to spend on medical bills and basic living expenses.

Q: Why Do I Need Payment Protection?

Erika: You might be thinking why do I need payment protection? I have life insurance already, or I have disability insurance through my employer. While that may be true, I’m here to explain the benefit of having that additional protection specific to your loan, using a few examples.

Example 1: Plan for the Unexpected

Your life insurance policy is designed to take care of your financial affairs in the event of your passing. Something many people don’t want to think about, but it’s an important part of any plan. The loss of a loved one is emotionally stressful, but you also don’t want to think of your family being financially stressed, right?

That’s where a payment protection plan can come in handy. It helps shield your finances against death, disability, or involuntary unemployment.

Example 2: Costs Add Up

Many people try to set up a plan so that their larger debts are paid off, and hopefully leave a financial cushion for their spouse or dependents. Think about the bigger picture for that money, like replacing your income, paying off a mortgage, daily living expenses, and funeral expenses. Those things add up!

So, why not look into life and disability coverage, also known as payment protection, for all of your home equity, personal, and auto loans?

Example 3: Unexpected Accidents

One of the reasons why I recommend payment protection is due to accidents. In the wintertime, car and vehicle accidents increase, with 24 percent of weather-related vehicle crashes occurring on snowy, slushy or icy pavement and 15 percent happening during snowfall or sleet, according to the U.S. Department of Transportation’s Snow and Ice Report.

Other weather related accidents include falling on the ice, injuring yourself shoveling that heavy snow, or even fun-related activities like skiing or snowboarding.

It’s better to be safe and protect yourself against the bills that can come from car repairs and insurance payments. Payment protection can provide you with a cushion to ensure your credit and loan payments stay in good standing if you are injured and unable to work.

Example 4: Limited Income

It’s not uncommon for people to ask me, “Is payment protection right for me?” There may be times where you experience limited income. We can’t always plan for these instances, so having a policy in place does more good than harm.

I’d rather see you have the coverage and hope you don’t need to use it than get that phone call that you need to see if you have disability coverage on your loan and find out you passed on it!

What I enjoy about First New York is that we have something for members to fall back on when they need it. This way they can take care of what really matters without having to worry about their finances.

Q: What Are the Benefits of Payment Protection?

Erika: Wouldn’t it be great to have a low-cost option to cover your auto, personal, home equity loan or even credit card, so that more of that policy could be used where they need it most? Disability protection is probably one of the most underrated benefits you can use. Everyone thinks ‘it won’t happen to me’… until it does!

You may have a serious accident or illness, or you might need surgery that puts you out of work for an extended period of time. Or planned events like maternity leave. Many employers only pay a portion of your regular salary and only for a certain period of time. Why use that limited income for your car payment or home equity line of credit, when we [First New York Federal Credit Union] can cover it for you?

Q: How Much Do Payment Protections Cost?

Erika: This depends on the amount of your loan and the term you select. At First New York Federal Credit Union, you can elect the disability payment protection offered through us and we have the ability to extend your loan term up to 6 months to get you to a fully protected and comfortable loan payment.

With disability protection, we’ll cover your monthly loan payment for you if you are out of work on disability for more than 2 weeks. If you should pass away and you have life insurance protection on your loan, the loan will be paid in full. So while these protections do have a premium, the benefits are worth it!

Conclusion: How to Get Protected Today

Thanks for the great Q&A, Erika! Feel free to contact Erika to talk more about your payment protection options at 518-393- 1326 ext. 1033, email her at erika.carroll@firstnewyork.org, or connect with her on Erika’s LinkedIn. She’d enjoy discussing how you can protect yourself from the unexpected through our payment protection program.

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