Payment Protection Insurance on Loans: Is It Mandatory and How Does It Work?

When applying for personal loans, financial institutions often suggest or bundle Payment Protection Insurance (PPI).

## Is PPI Legally Required?
**No.** In consumer credit, payment protection insurance is never legally mandatory. While lenders may offer a slight interest discount if you add it, tying the loan approval strictly to mandatory insurance purchases without alternatives is prohibited.

## What Does Payment Protection Cover?
– **Temporary Disability:** Covers monthly payments during prolonged illness or injury.
– **Involuntary Unemployment:** Protects salaried employees against involuntary dismissal.
– **Total Disability or Death:** Liquidates the remaining debt balance to safeguard family members.

## When Is It Worth Considering?
It makes sense for large, long-term personal loans over €15,000. For small micro-loans or short-term credits under €5,000, insurance premiums often outweigh the protective value.