Payment protection insurance, otherwise known as PPI, is a type of insurance policy that provides coverage for individuals in case they experience any unfortunate incidents that will prevent them from making their income in order to repay any debts they made. The coverage may differ between policies, but the general rule is that illness, injuries, or accidents will make the insurance company liable to pay a partial amount of the policyholders debt to his or her creditors, while death will automatically make the insurer responsible for paying the outstanding debts the policyholder contracted prior to passing away.
Payment protection insurance has received so much negative press in the past year because of unscrupulous insurance sellers who are willing to use just about every dirty trick in the book just so they can clinch the sales. This has made a lot of people more than a little wary and even suspicious about the insurance policy, because the news has recently been filled with so many negative reports about it. In spite of this, there are still individuals who are willing to get payment protection insurance because of the various benefits these offer.
- What your existing insurance policies are. Before you decide on getting PPI, make sure that the insurance policies you’ve already bought actually don’t provide coverage for debt repayment, since there are other types of insurance that actually protect people in terms of loan repayment in case of unfortunate incidents.
- Who to buy PPI from. Traditionally, moneylenders are also the ones who offer payment protection insurance to their debtors. Even so, it’s possible to decline their offer and get PPI from another insurance provider, since borrowers aren’t required to purchase payment protection insurance from the same institution that lent them money.
- How the policy was sold. If the lending institution told you that you are required to buy PPI in order for your loan to be approved or if your loan approval will occur much faster if you bought the insurance policy, it might be a good idea to hightail it out of there and look for another lender who you can transact with, because PPI is not a requirement for giving loans.
- What the policy details are. The most typical way for people to get trapped into buying mis-sold PPI is because the stipulations of the insurance they purchased are either incomplete or inappropriate to the buyers circumstances. Make sure that you are actually covered by the insurance you’re buying before you actually pay for it. A lot of people purchase PPI only to realize that they’re not provided protection. There are several exclusionary clauses of PPI, so check these out to see if you’re actually covered by the policy. Also, check whether the duration of coverage provided by the insurance is enough to see you through the whole repayment period.
- What you’re paying for. When taking out a loan, make sure that you ask the lender what the fees are included when they lend money. A common technique of moneylenders is that they give the lump sum of what borrowers should pay, which already includes charges for PPI. Along with asking about their interest rates, make sure that you ask whether they’re charging for payment protection insurance as well.
- If there is a cancellation clause. Even if you bought the insurance policy willingly, it is still a good idea to check whether there is a cancellation clause that will allow you to end the contract before the duration ends. That way, you wouldn’t end up being tied to a policy and effectively forced to pay for the premiums long after you think the insurance has outlived its uses just because the company isn’t allowing you to cancel the policy.
Try to take these factors into consideration before purchasing payment protection insurance. That way, there is lesser danger of you falling into the trap of purchasing mis-sold PPI that you will not be able to use or claim for.