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