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Payment Protection Insurance, (also known as PPI, Credit Protection Insurance, Loan Repayment Insurance) (NOT to be confused with Income Protection or Credit Card Cover) is an insurance product that is designed to cover a debt that is currently outstanding. This debt is typically in the form of a loan or an overdraft, and is most widely sold by banks and other credit providers as an add-on to the loan or overdraft product. Though there are minor variations depending on the supplier of the insurance, it typically covers a person against an accident, sickness, unemployment or death, each of which are circumstances that may prevent them from earning a salary/wage by which they can service their debt. A few providers also include carer cover. If the appropriate criteria are met, the insurance covers minimum repayments against the loan or overdraft for a finite period (typically 12 months). [1] After this point the person must find other means to repay the debt, though the period covered by insurance is typically long enough for most people to start working again and therefore start earning a salary with which to service their debt. PPI is different from other types of insurance such as home insurance, in that it can be quite difficult to determine if it is right for a person or not. Careful assessment of what would happen if a person became unemployed would need to be considered, as payments in lieu of notice (for example) may render a claim ineligible despite the insured person being genuinely unemployed. In this case, the approach taken by PPI insurers is consistent with that taken by the Benefits Agency in respect of unemployment benefits. In all types of insurance some claims are accepted and some are rejected, however in the case of PPI the number of rejected claims is high compared to other types of insurance. A primary reason for this is that the insurance is not underwritten at the sales stage, and is taken out by customers without careful assessment as to whether it is right for their circumstances and without careful attention to the policy eligibility conditions. In the case of individuals who seek out and purchase a policy without advice, it can be considered that it was the responsibility of that person to ensure what they were purchasing was right for them. However most PPI policies were not sought out by consumers, and in some cases consumers are not aware that they even have the insurance.[2] Several high-profile companies have now been fined by the Financial Services Authority for the widespread mis-selling of Payment Protection Insurance. Claims against mis-sold PPI have been slowly increasing and may approach the levels seen during 2006-07 period, when thousands of bank customers were claiming against what they claimed were unfair bank charges. In their 2009/2010 annual report, the FOS stated that 30% of new cases referred to payment protection insurance [9]
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Payment Protection Insurance Subcategories
Payment Protection Insurance Articles
How a Payment Protection Plan Offers Security against Future Risks
by Corwin Smith
Sep 08, 2010
Payment protection insurance is a standard insurance cover provided with loans like personal loans, credit cards, mortgages, or car loans. In general, the financial world refers to this financial security as PPI. However, the security is also offered...
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