What is PPI and can I Claim on it?

By: Paul Geraghty - Updated: 8 Apr 2016 | *Discuss

 

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Payment Protection Insurance, or PPI for short, is often sold along with loans, mortgages or credit cards. Sometimes finance companies are even rather insistent that you take it. PPI is supposed to provide you with peace of mind in case you are no longer able to repay through your debts through your monthly earnings. Although the exact details of each policy differ, typically it would cover you in cases of accident, illness or unemployment, taking over your debt repayments during the period in which you were unable to work. PPI also goes by a variety of other names, including Credit Card Repayment Protection, Personal Loan Protection and Accident, Sickness and Unemployment Cover.

Clearly, if you’re about to become redundant, having PPI in any debts you have should prove extremely useful. Usually, PPI payments are made for a maximum of 12 months, but this can help greatly in tiding you over while you look for a new job.

You should check all your existing debt agreements to see whether you have PPI on them. Do check, even if you think you haven’t got it. A lot of people casually agree to PPI at the time they take out a loan or credit card without actually realising what they’re doing! You may find you have it, and have been paying for it all these years. without even realising it!

Taking Out PPI

If peace of mind is important to you, it may be worth taking out PPI on any new debt agreements you enter into. Be aware, though : if you are unemployed, or know that you are going to be made redundant, that will almost certainly invalidate the agreement. PPI should be taken out when times are good, in case they don’t last. By the time the bad times roll around, it’s usually too late.

Virtually every finance provider offers a PPI option along with the debt product they sell to you. It’s important to know that this is not the only way to get payment protection, though. You don’t have to buy PPI from the company providing the initial debt finance. It’s also possible to get it from a third-party which had nothing to do with the original debt arrangement. In fact, studies have shown that it is often cheaper to buy PPI from a third party. The basic payment protection options offered by finance companies sometimes amount to as much as 25% of the original debt, so it’s worth shopping around to see if you can find something cheaper.

Claiming on your PPI

You would think that once accidents, illness or unemployment hits, claiming on your PPI would be a relatively simple matter. After all, you may have been paying a significant percentage of your overall debt for several years in order to get that protection. Experience demonstrates, however, that this is often far from true. Many people find that, when they attempt to invoke the provisions of their policy, their claims are rebuffed. The minutiae of the policy’s terms and conditions often throw roadblocks in the way. It is estimated that around 1 in 4 PPI claims are rejected.

In fact, it is far from uncommon for people to find that the policies have been framed in such a way that they could never have claimed on them, and should never have been sold them in the first place. This is one of the great British financial scandals which has led to counterclaims about policies being mis-sold. If you find that you cannot claim on your PPI policy, even though you have been made redundant, you should definitely look into claiming back the PPI premiums you paid, on the basis that you were mis-sold the policy in the first place.

PPI – Conclusion

Although it now has something of a bad reputation, PPI can be genuinely useful, particularly when bad times are in prospect. It’s essential to shop around to get a good deal, however, and to read the fine print carefully.

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