Payment Protection Insurance or PPI. What is PPI and what does it cover?
By MoneyhighStreet Staff. Published on January 22, 2009 This post currently has 4 comments.
Payment Protection Insurance, PPI, is currently generating a lot of news. This is because the FSA (Financial Services Authority), amongst others, is tackling the issue of poor selling or mis-selling of PPI.
PPI, sold in the right circumstances, can be helpful.
But what exactly is PPI? What does it cover? How much does PPI cover cost and where can it be bought?
These and other matters around PPI will be covered in a series of articles here on MoneyHighStreet.
So firstly, what is PPI and what does it cover?
PPI is basically a type of insurance. It is insurance that may be taken out alongside a loan, mortgage, credit card or store card.
Under a PPI policy, an agreed sum of money is paid out each month to fully cover, or cover a percentage of the payment due on your mortgage or loan etc if you are unable to work.
You may be unable to work and meet the monthly payments yourself for a number of reasons, including
- becoming unemployed, through no fault of your own
- having an accident or
- becoming sick
Each PPI policy will have its own terms. Typically though the insurance will cover your mortgage or loan payments for 12 or possibly 24 months. After the period, as defined in your particular policy, you have to cover the monthly payments yourself.
For credit and store cards, the monthly payment will at least pay the minumum amount owed each month. Sometimes it will pay a percentage of your outstanding balance.
The outstanding balance either then has to be paid off by yourself or you start incurring additional charges to your card for interest payments.
Be aware that the payments for credit card or store cards will generally be based on the amount owed at the time you claim. This means any balance built up thereafter is usually down to you to pay.
Payments will only be made if your personal circumstances are covered by the PPI policy you have taken out.
It is vital therefore that you fully understand what cover you are buying and ensure that the PPI policy meets your requirements.
To be clear on exactly what PPI cover you are buying, or have already bought, you need to check the key policy details. You can either do this yourself or seek guidance from your provider.
Using the policy details, you will be able to determine what the policy covers, what exclusions there are (what is not covered) and how long payments will be made should you make a claim.
PPI may be charged as a single premium (e.g. when you take out your mortgage or loan) or through regular monthly payments.
The FSA is concerned over the way single premium PPI has previously been sold and continues to be sold by many providers.
Addressing issues over poor PPI sales practices is a priority for the FSA, ensuring consumers make well informed purchasing decisions.
The Competition Commission is also undertaking an inquiry into the PPI market.
The FSA believe that with the two entities working together it will ensure changes in the PPI marketplace that result in better solutions for consumers.
Fundamentally though, a PPI policy can be useful insurance to have to protect your credit payments, particularly in this economic climate.
That said, you need to know what you are buying and be clear that the policy meets your particular circumstances so that in the event that you need to make a claim there is a strong probability that your claim is met.
MoneyHighStreet are pleased to work with British Insurance, a leading provider of Payment Protection Insurance, from whom you can get a PPI quote quickly and easily.
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Comments
4 Responses to “Payment Protection Insurance or PPI. What is PPI and what does it cover?”
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I took out mortgage protection with a company called “Paymentshield” and it has proved very helpful indeed.
I lost my job 8 months ago and although i felt confident that i could find another, it proved to be not so easy.
I made a claim on my insurance and they paid out, with few questions asked.
I had to fill out forms, and so did my old employer (to verify that i didnt know i was going to be made redundant) and i had to sign on at the job centre to register for work, which i was obviously going to do anyway.
So far i have not been able to find another job, but i remain positive.
The good thing is that the money from the insurance is stopping my mortgage going into arrears, and they have explained to me that they will still pay out if i stop the monthly premiums now, but if i keep them going instead, they will be able to meet my next claim if i become unemployed from my next job.
I think thats fair, and would advise anyone with a mortgage to take a look at this type of insurance.
Just read your great feature but can you tell me what i need if i do fall sick and how to go claiming the insurance.
eg sick note etc.
You’ll need to contact the claims administrators for the PPI policy you have. The documents you have will give a contact no / address.
When you make a claim you’ll need to provide such as a completed PPI claim form, recent bank statements and pay slips.
For a sickness or accident claim you’ll also at least need a medical certificate for the peiod you are claiming for.
The PPI claims adminstrators for your policy may also ask for other material depending on your individual circumstances.
[...] FSA has now written to all firms selling single premium Payment Protection Insurance (PPI) with unsecured loans requesting they refrain from doing this by 29 May at the [...]