One of the most innovative insurance products in the UK is PPI. PPI means Payment protection insurance. it covers ones debt repayments for twelve months, insuring that the policyholder does not suffer the consequences of being over indebted. Repossession is one of the worst consequences of not being able to pay for debts. PPI is a product that prevents debt accumulation from happening. You just need to avoid having to make ppi claims.
How it Works
Once you sign up for a PPI policy, the insurance company or bank where it originated will insure the holder for a period of one year. Within this period, if the policyholder is unable to pay for his debts due to sickness, accident, death, or involuntary unemployment, the insurance company or bank will then cover a percentage of the debt repayment for a period of one year. The twelve month period of repayment is an industry standard, because it is expected that the policyholder will have found a new job within one year. The PPI coverage can also apply if the policyholders income has been significantly reduced
Who Can Get PPI?
Almost anyone aged 18 to 65 can get a PPI policy, however, there are some exclusions. People who are unemployed, self-employed, or have an pre-existing health problem that prevents them from earning a stable monthly income are usually excluded in PPI. Likewise, people who are retired or are of retiring age may have difficulty in getting a PPI policy.
What is the PPI Controversy All About?
The PPI controversy erupted sometime between the years 2005 and 2008, when a series of complaints regarding the way banks sold PPI surfaced. It became apparent that banks were compelling people to buy PPI by telling them that it is a compulsory policy they need to secure before they are allowed to borrow money. In some cases, people were not made aware about the nature, effects, and consequences of PPI. Most people thought that the PPI was part of the loans and mortgages they were taking out, which they had to pay. As a result, many people turned out having unnecessary loan and mortgage protection that they will never be able to utilize. It is thought that the majority of PPI policy holders will never be able to make a claim on their policy.
FSA Punishes Banks
The FSA or the Financial Services Authority, the UKs government watchdog for financial misdeeds and failures, has fined over 24 banks since 2005, amounting to over 13 million pounds. The largest single fine made was with Lloyds Banks, which was fined more than 3 million.
Where to Go for a Refund
If you think you have been sold PPI unfairly, you should first go to the bank or financial institution who sold you PPI. Different banks have different procedures that need to be followed when making a PPI claim. Be sure to follow these guidelines to facilitate a smoother and faster processing of your refund. It will take at least eight weeks for the banks process your claim and submit a response. However, if you feel like the banks are not handling your case very well, you can approach the Financial Ombudsman Service or FOS. The FOS takes care of individual financial disputes, and its services are offered for free.
Claims companies are another alternative to banks and the FOS if you want to make a PPI refund. In the FOS, there are thousands of pending complaints that could slow down the processing of new complaints. The FOS will prioritise the earlier backlogs, which can leave new complaints pending for more than one year. Claims companies only charge the client after the refund has been successfully claimed. Claims companies usually take a share of the refund as payment for their services, but the amount will not usually exceed 25% ‘(plus tax) of the amount of refund the clients are awarded.
If you think you have been mis-sold PPI, do not hesitate to file a complaint. Over 80% of ppi claims are ruled in favor of the policyholder.