PPI: Payment Protection Insurance

Payment Protection Insurance is designed to cover you if you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. But while it can offer a sense of security, the cover can be overpriced, filled with exclusions and often mis-sold. For example, policies do not pay out if you are self-employed, and if you do make a claim, the benefit is often little more than the premium paid.
That said, if you do qualify for a payout, the short-term lifeline it offers can help you to survive a financial crisis.
If you’ve ever taken out a loan, mortgage, credit card or store card, or bought something on credit, then the chances are you were sold payment protection insurance (PPI) at the same time.
The idea is that PPI covers your debt repayments if you can’t work – for example, you become ill or have an accident, or if you are made redundant. But PPI is often mis-sold which means you might spend a lot of money on expensive insurance you’ll never be able to claim on.
The amount of money a person would pay for their PPI coverage is based on the amount of the loan; and is often just added into the monthly payment. There are other forms of payment protection insurance which are meant to cover bills other than mortgages, including credit cards and car payments, if you cannot work.


Payment Protection Insurance sounds great in theory- but a study by Citizens Advice (a national charity organization) shows that 85% of people who tried to put in claims under their PPI coverage were unsuccessful.
PPI policies that are sold by several well-known mainstream lenders exclude coverage for several of the more common problems which may keep people from working, things like mental issues or bad backs. There are even PPI policies with age limits; and that exclude people who are self-employed.
When people have been able to successfully make a claim under their PPI insurance, the amount of money that was paid out does not usually keep the individuals free from debt- particularly for credit card PPI coverage. In many cases, payment protection insurance only pays over a period of a year- but does so with minimum monthly payments so, for example, a borrower who is able to claim payments from their PPI policy on a $1,000 credit card account would see their entire debt reduced by about $12 over the course of the year!
Did you know that PPI is judged to be mis sold in a lot of cases. Those consumers may have been ripped off for 15-30 billion pounds.
The Citizens Advice Bureau has called the mis-selling of PPI a “protection racket”.
It also estimates that 80% of PPI policies have been mis-sold on credit cards and loans. The behavior of lenders in relation to your best interests has been nothing short of a disgrace. A lender forces someone into buying a PPI policy by refusing to complete his loan or credit card without it. A lender sells him a policy that is massively over-priced. The Citizens Advice Bureau has found that the cost of mis-sold policies can add 13-56% to the cost of his loan!
A lender sells him a policy on which he would not be able to claim. For example, it might only pay out to people before their 65th birthday, but he signed up to it when he was 61 and will be 65 before the policy ends. Consumer groups, such as ‘Money Saving Expert’ have started campaigns to encourage borrowers to claim refunds on PPI. Template letters can be downloaded from the website to help you to reclaim the costs associated with the cover. This is ALL that he need to do to instruct ppiclaimline.com to manage his claim for him. Assuming authority think that he has a good case, ppiclaimline.com will send him a ‘Letter of Authority’ in the post. He’ll need to read and sign it.
Enclose the letter in ppiclaimline.com’s pre-paid envelope along with copies of all the documentation and correspondence he has relating to his PPI policy. If his lender tries to call him to argue about or settle the claim then call ppiclaimline.com immediately as he may not receive everything he is entitled to.
The government is running a consultation on what to do?
In January 2009 the Competition Commission ruled that banks should be banned from selling PPI alongside credit cards and personal loans.
The Commission’s investigation concluded that lenders have an unfair advantage selling PPI with credit products, resulting in an uncompetitive market where consumers are overcharged.
It ordered that from 2010, banks and retailers making a loan or credit offer must wait a week before they can sell PPI to the borrower. The Commission hopes the seven-day cooling off period will encourage consumers to shop around for the best deal. Single-premium PPI – when the cost of the insurance is added to the debt so that borrows repay interest on both – has also being prohibited. The Commission also ordered lenders to provide personal PPI quotes and annual statements to customers.
The consumer group Which? first highlighted the problems associated with PPI a decade ago. Yet when it carried out a mystery shopping exercise in 2007, it found that consumers were still being “duped” into buying the cover.
It said that people were at risk of unknowingly purchasing the cover because staff at some providers added PPI during the sales process as a matter of course. Elsewhere, a number of lenders were fined by the Financial Services Authority (FSA), the City watchdog, for mis-selling. At the same time, an investigation by the Office of Fair Trading(OFT) exposed sales staff for telling borrowers that the cover was compulsory, or including it in loan quotes without explaining that it was optional.
The OFT referred the PPI sector, including MPPI, to the Competition Commission in February 2007.
Check with your lender
If you take out a loan, check whether the quote includes PPI and remember that it is not compulsory. If you don’t want it, you can ask the lender to remove it.
Consider a standalone policy
If you do want to take out PPI, it is generally cheaper to buy standalone cover offered by the likes of British Insurance the broker.
Do not buy on price alone
When buying any protection product, price should not be the only consideration. You should also look for the policy that best suits your individual circumstances. Furthermore, always consult a financial adviser when buying protection insurance, as that is the only way that you can make a complaint if the product you are sold is suitable for you.