| Payment protection insurance (PPI) has taken a | | | | arrears, defaults, County Court Judgements (CCJs) |
| bashing recently. PPI is a type of insurance designed to | | | | and, depending on the type of loan product, the loss of |
| protect repayments on financial products if borrowers | | | | their home. Payment protection insurance is designed |
| find that they are in financial difficulty. | | | | to make sure that repayments are met, avoiding this |
| PPI has been examined by the Financial Services | | | | sticky financial situation. |
| Authority, criticised by Which? and is now under | | | | Inside PPI |
| investigation by the Office of Fair Trading. Most of | | | | PPI is available to most people aged 18 to 65 who are |
| these organisations are concerned about protecting | | | | employed for at least 16 hours a week or have been |
| consumers' rights. They are worried about: | | | | self-employed for a long period. Once borrowers have |
| · whether consumers are sufficiently well | | | | signed up for the insurance, they have to wait a |
| informed at point of sale to make decisions about | | | | certain period before making a claim. This is usually 60 |
| whether to have PPI · the wide variation in the | | | | to 120 days. Once they do make a claim and have it |
| cost of PPI policies · the huge profits made by | | | | accepted, their payments can be covered for a period |
| lenders offering PPI because of the relatively few | | | | of 12 months or more, depending on the policy. |
| claims made by borrowers · and the lack of PPI | | | | One key thing that borrowers should be aware of is |
| providers who are not linked to banks or other lenders. | | | | that the sellers of some financial products add the |
| Given these concerns, it's a good time to find out more | | | | cost of the PPI policy to the credit being offered. This |
| about whether PPI is really the right choice for | | | | means that borrowers can end up paying interest on |
| borrowers. | | | | the insurance policy. This is one of the many reasons |
| Why Have PPI? | | | | that PPI selling has been criticised. Borrowers should |
| It's difficult for borrowers to know how their financial | | | | also look into the cost of the insurance, as this varies |
| circumstances are going to change. When they are | | | | widely. |
| taking out a mortgage, loan, credit card, store card or | | | | Beyond PPI |
| other financial product, the sales person often offers | | | | Many borrowers do not realise that they do not have |
| PPI. The reasons why it might be a good idea are: | | | | to take out PPI at the time of buying a financial product |
| · if someone becomes unemployed or is made | | | | and the people who are selling PPI often do not make |
| redundant · if a long term illness prevents | | | | this clear. There are some stand alone PPI providers |
| someone from working · if someone is injured and | | | | who may provide a better choice. Borrowers who |
| is unable to work | | | | repay loans from earnings should also consider an |
| All of these circumstances mean that borrowers might | | | | income protection policy, which will protect most of |
| not be able to meet the repayments on the mortgage, | | | | their income rather than individual financial products. |
| loan, credit card or store card. This could result in | | | | |