When it comes to understanding payment protection insurance it can be hard. Depending on where you go for the protection, you can be given very little information on the subject which could at the very worst leave you being mis-sold a policy on which you cannot possibly hope to claim should you become unable to work due to accident, long term sickness or involuntary redundancy.
At the very least, you could end up paying well over the odds for a policy that only provides basic cover.
As recent research from the Financial Services Authority has shown, the majority of those policyholders who have been mis-sold a policy have bought it from the high street banks and lenders who tend to sell it alongside a credit card, loan or mortgage.
The key to buying the right cover for you is to shop around and thoroughly investigate the market place. Standalone providers can not only help you to save a substantial sum of money on the quote for the premium but you can get a better quality product.
Payment protection insurance is taken out if you want to safeguard your monthly credit repayments in case you should find yourself out of work due to an accident, sickness or unemployment. A good policy will normally pay out for up to a period of 12 months (some pay for up to 24 months) which is usually more than enough time to get yourself back on your feet.
It is essential that you understand payment protection insurance as there can be hidden exclusions in the small print. For instance, if you are self employed or over a certain age then you will probably be ineligible for cover, so always check before signing on the dotted line.
Always make sure that the payment protection insurance isn't already included in the loan. Sometimes the high street lender will include the cost of the cover without asking if you want it. If you do want the cover, then simply ask that you be given a quote for the loan without protection and go to an independent provider for your policy.
When you take out a loan, whether it be a personal loan or secured loan, you will be repaying it over a fixed term which can range from a couple of months to several years. But what happens if you cannot afford to repay part of your loan one month? Well what will happen will depend on the agreement you signed with your lender. Sometimes you will be able to simply pay it off at a later date, or you may find your regular payments go up to cover your missed payment.
But what if something unexpected happens, like you lose your job or fall ill, and are unable to pay off your loan? Again, what will happen will depend on your loan agreement but many loan providers will offer you Payment Protection Insurance (PPI) when you take out your loan to cover you in such posibilities. Although this may seem like an attractive prospect you should remember that this is an additional cost on top of your loan, and you should consider whether or not you really require this cover.
What is Payment Protection Insurance?
Payment Protection Insurance is offered by lenders to borrowers when they take out a loan. It covers their personal or secured loan and avoids the borrower getting into debt if they an accident, are sick or become unemployed. It will usually be offered by the lender at the time of the borrower taking out the loan, but is is also available to be taken at a later date or from another broker.
The cost of Payment Protection Insurance will vary depending on which lender is offering it. It will also depend on the personal circumstances of the borrower, along with the amount that is being borrowed and for how long the repayments are for.
The Downside of Payment Protection Insurance
Although Payment Protection Insurance may seem an attractive prospect to stop you falling behind with your loan repayments in the event of unforeseen circumstances, there are a number of factors you should consider before entering into any agreements for it.
Firstly, Payment Protection Insurance can be very expensive, and can even double the actual cost of the loan. Secondly, you may not be eligible for payments for a period of up to six months after starting the policy. Thirdly, some only cover redundancy so are not suitable for the self-employed. Finally, sometimes the cost of PPI is added to the loan itself and you can end up paying interest on both the loan and PPI combined, as opposed to paying for two seperate products.
The Mis-Selling of Payment Protection Insurance
There have been frequent criticisms raised at companies offering Payment Protection Insurance that they mis-sell it. Many do not explain to customers that it is an option and instead talk the customer into thinking that it is part of the loan itself. Others do not explain that it can be taken out at a later date and with another company, which can often prove a lot cheaper. Also PPI is often sold by sales assistants who have no financial background so should not really be offering the product. This is sometimes the case with storecards which are offered by shop assistants. There have also been criticisms that Payment Protection Insurance policies include too many exclusions and only pay out under restrictive circumstances.
Both Simon Burgess & Chris Marshall are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Simon Burgess has sinced written about articles on various topics from Mortgage Insurance, Finances and Income Protection Insurance. Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of low cost ?> payment protection ins. Simon Burgess's top article generates over 74000 views. to your Favourites.
Chris Marshall has sinced written about articles on various topics from Health, Anger Control and Credit Cards. .. Chris Marshall's top article generates over 49500 views. to your Favourites.