Payment Protection Insurance: Protection for Your Loan Payments – Explained Honestly

What's Covered?

The insurance covers two situations:

• Full incapacity to work due to illness or accident – your loan payment is covered as long as you're 100% unable to work.
• Involuntary unemployment – if you're laid off and are entitled to ALV benefits, the insurance covers your payment.

Depending on the provider and bank, additional modules may be included (for example, a monthly extra payment in your favor).

What You Need to Know Before You Sign

Only 100% Counts as 100%

The insurance pays out only in cases of full incapacity to work. If you're 50% or 80% unable to work, you get nothing. This is the most common reason claims are denied.

Qualifying Period and Waiting Period

Two periods that are often confused:

• Qualifying period (typically 3–6 months): You're not yet covered from the start of the policy. Anything that happens during this time doesn't count.
• Waiting period (typically 30–90 days): Once a claim event occurs, the insurance only pays after this period has elapsed – not retroactively.

Coverage Ends Automatically

At the latest on your 65th birthday, upon retirement, if your working hours drop below 25 hours per week, if you move abroad, or if the insured employment relationship ends.

What's Not Covered

The exclusions are the critical part. This is worth reading closely:

Not covered for incapacity to work:

• Partial incapacity to work (anything under 100%)
• Pre-existing conditions from the 2 years before the policy started
• Mental health conditions – unless confirmed by a psychiatric specialist (a general practitioner's certificate isn't enough)
• Back pain, neck pain, herniated discs – unless objectively confirmed by imaging (MRI, CT)
• Intentional acts, severe alcohol or drug dependency
• Incapacity to work outside of gainful employment
• Maternity leave

Not covered for unemployment:

• Resigning voluntarily or being dismissed for cause
• Fixed-term employment contracts (expiration = not a covered event)
• Termination during the probationary period or apprenticeship
• Self-employed individuals, business owners, managing partners
• Partial unemployment
• No entitlement to ALV benefits in Switzerland
• Anyone who knew about an upcoming termination before taking out the policy

When Is It Worth It – and When Isn't It?

Makes sense if:

• You're the sole earner and don't have reserves for 3–6 months of payments
• You work in an industry with a higher risk of layoffs
• The loan amount is high relative to your income

Less worthwhile if:

• You're self-employed (unemployment coverage doesn't apply at all)
• Your employer already offers good sick pay insurance
• You have enough reserves to bridge a rough patch
• The premium makes the loan disproportionately more expensive

Good to Know

• After signing, you have a 14-day right of withdrawal – in writing, no reason required.
• The insurance can often be canceled with 1-3 months' notice, effective end of month.
• The terms depend on which insurance company the bank works with – ask to see the details before you sign.

Our Recommendation

Get advice before you sign up. We've seen many cases and both sides of the coin, with and without the insurance. At the end of the day, everyone who chose the insurance and ended up in one of the situations it covers was genuinely glad they had it. Customers often forget about it because the premium is built into the monthly payment – and when something does happen, the relief is all the greater. And those who turned the insurance down, despite every factor pointing toward taking it, are the ones we've had to accompany through hard times afterward – which never stops being hard for us too.