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.
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 minimum 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.
What is the PPI Mis-Selling scandal, why has Payment Protection Insurance been mis-sold?
Many thousands of people have been sold PPI policies which were totally unsuitable for them – for example, some were sold a policy that they could never claim against as they were self-employed or retired.
According to the Financial Ombudsman, the number of complaints about mis-sold PPI leapt to over 30,00 between October and December 2011, nearly 60% more than the previous 3 months.
Some people have even been sold PPI without even realising it, let alone agreeing to it.
Banks made huge profits from selling the policies alongside mortgages, loans and credit cards but only 10% of policies ever paid out. The policies were invariably massively overpriced compared to other standalone Payment Protection Policies available on the market.
If you believe you have been mis-sold a PPI policy, you can use a claims company, such as PPI Return, to act on your behalf to try and get your money back. Be aware that whilst many will state ‘No Win No Fee’, if you do win your claim they will take a chunk of the money you receive as their fee.
You can, if you prefer, pursue the claim yourself directly with the lender or through the Financial Ombudsman or Financial Services Compensation Scheme.
So, should you buy Payment Protection Insurance?
The bottom line, as with all personal finance matters, is that you have to make this decision based on your own specific set of circumstances. Seek professional advice if need be.
That said, we at MoneyHighStreet.com believe being prepared is vital and that means making sure your outgoings are protected should you find yourself not able to work. One option to achieve this is through PPI cover – and despite the bad press, there are some good policies available at a good price.
If you believe you have been mis-sold a PPI policy
– PPI return website – a claims company to help you make your claim.
– Financial Ombudsman website – if you want to make a claim yourself.
Though the PPI scandal is set to end next year, the damage it has done, both financially to the victims and trust between banks and financial institutions with the public, is something that cannot be undone anytime soon.
I got a capital one card with 35% interest due to my bad credit history i guess…I am using that card and owe the balance around 2300 pound, from last two years I am paying the minimum amount but recently I found out that they are charging me for payment protection insurance which is around 17.50 per month…..well I didnt care
last month I came to Pakistan visitng my family here and I got some chest pain which ended on heart bypass surgery as I dont have the insurance so I paid all by self and I am still here on a bed rest….
Now could any one advise me how I make the claim from Capital one as that was the only insurance I have……….I am self emplyed working as a commission agent……did that ppi paid off the amount i owe cap1?
hello i took out a mortgage and at the same time it took out unemployed insurance with them if i became sick is that class as ppi
when my business folded Lloyds cancelled the PPI insurance so it has not helped. I was a director does that count as employed or self employed ?.
I paid PPI on my bank loan my car loan and to cover me if I was unemployed. I was self employed and thought I was protecting my family. I have been out of work for 10 months and I have had to fight all the way to get these payments made. The bank have just agreed to pay a small perportion of the loan about 4 months and I am still fighting to get the others. I do not need this stress when I am unwell. I told all PPI providers I was self employed now as I can not claim JSA they say can not pay me!!!
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.
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.
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.