Payment protection insurance (PPI) is one of a family of protection policies that can be taken out to give you an income if you were to be out of work. In this case the policy would make sure that you had the money needed so that you can carry on meeting your loan or credit card repayments each month.



Payment protection would begin to provide you with the money so that you wouldn't get behind on your loan or credit card repayments and so not get into debt. For a premium each month which is based on the amount you want to cover and your age at the time of taking out the policy, once you had been out of work for a period of time which can be anything between the 31st and 90th day you would then be entitled to receive a tax free income each month for up to 12 months and in some cases for up to 24 months.

A payment protection policy is also known as ASU insurance; this is because the cover pays out if you should be out of work after suffering from an accident, sickness or through unemployment by such as redundancy. However, as with all insurance cover, there are exclusions in all policies which could mean that you aren't eligible to make a claim and so a policy wouldn't be in your best interests. These include if you are only in part time work, if you suffer an ongoing illness, are of retirement age of if you are self-employed. The exclusions can vary from provider to provider so it is essential that you do read the key facts and small print of a policy before signing for the cover.

Payment protection can be taken out alongside the loan or credit card from the high street lender but this is the dearest way of purchasing the cover and it can add hundreds onto the cost of the loan. A far better way to purchase payment protection is to buy it independently from a standalone specialist in payment protection, a specialist will always offer the cheapest premiums for the cover and as they are more ethical than the high street lender they will make sure that you have access to the information needed so you can make sure that a policy is suitable for your needs before you purchase it.

Mis-selling of payment protection was high lighted in 2005 when a super complaint was made to the Office of Fair Trading by the Citizens Advice, following this an investigation into the sector began which showed that mis-selling was wide spread and resulted in several major high street names receiving fines. The mis-selling stemmed from a failure on the providers part to give the information needed for consumers to make an informed decision.

If you want payment protection to work then you have to understand the ins and outs of a policy. In March 2008 the Financial Services Authority are going to introduce payment protection insurance comparison tables, the table will ask a series of questions which then lead to the consumer being able to make an educated decision.