Auto Loan Debt Protection Plan worth it?

[Anonymous]

Hi all,

I'm wondering what your thoughts are regarding Debt Protection Plans?

I have two auto loans that I opted in for the protection plan that covers death, disability and involuntary unemployment. It is an additional $50 and $30 for the loans. The reason I opted in is because I work in construction and I have injured myself before. 

My thoughts are in case something were to happen again, this plan would cover me for 6 months. On the other hand, is it worth the additional $80 a month? If injury occured I'll be compensated by Labor and Industries or unemployment benefits if it led to that. Downside, is that they would only give you benefits of 60% to 75% of pay. 

I've personally never opted in for protection plans. Your thoughts?

[MAZDA3]

Absolutely yes! I just bought a new car and added a payment protection plan. You just never know when you're going to need it. Mine is $1.70 per $1k financed and is good for the life of the loan, so if I'm out five years it pays off the car.

Yes, it's an added expense, but well worth the peace of mind.

[Anonymous]

Insurance is always a gamble . . that the insurance companies usually win on

Example: $50/month x 60 month note = $3000

In the event you used six months of the coverage, it would cover a $500/month car payment for six months and you'd be at the break even point on it.

If you never end up needing it, you just paid $3k for nothing.

It's much better to have an emergency fund and just be able to cover the payments yourself should the need arise.

[StartingOver10]

Agree with SteelerNYC.  It is better to put the funds in a savings account rather than spend them on a "Protection Plan".  

Have you read the protection plan contract?  Over my lifetime I have read several and each one had so many exclusions in the plan as to make it worthless. So I never purchased one -ever.  What do I mean by worthless?  For example, I am 100% commission 1099 independent contractor and in each one of those protection plans I read, you are not covered if your income is from self employment.  1099 type income is considered self employment. They will take the premium payments, but not pay out should you need to make a claim. To me, that is the worst of everything (pay for premium, but no coverage). that is just one example and it may not apply to you at all. But there are many exclusions that do apply. The only way to know is to read the contract. 

I don't know what your debt protection plan says, but read it to make sure that there isn't something in the terms and conditions that would disqualify you.  My personal opinion: those plans aren't worth the paper they are printed on....

[Anonymous]

I am not a fan of these plans especially at a cost of 80 bucks a month.  Think of it this way assuming you have 60 month loans the combined amount you will pay is $4,800.  That's a lot of cash for a product that only protects you against a payment on a depreciating asset.  The few plans I have read have interesting language in them that excludes or offsets based on disability income etc so personally I would put the cash in the bank over buying a plan like this but as stated above everyone has to make those decisions on their own.  I say this as someone who was out of work for 2 years because of a workplace injury so I have been there.  

[MAZDA3]

For people who don't have a short term disability plan at work for whatever reason, these plans do have value.

[Anonymous]

Thanks for the reply everyone!!

SteelerNYC I re-read every little fine print on the contract. Indeed, in one of the clause it does not cover 1099 based and self employment income. I called the Loan Officer to ask and verified that. I pretty much would need to write myself a check or be a W2 employee. 

Thank you for bringing that to my attention.

So far the extra $80 I'm going to reroute it to savings and pretend as if its a car payment.