Payment Protection Insurance or PPI

This type of insurance is seen by many advisers and organisations like the CAB (Citizens Advice Bureau) as an additional source of revenue for the lender and not good value when considering the alternatives to protecting the customer.

The FOS (Financial Ombudsman Service) has been receiving a very large number of complaints and have issued a fact sheet. If you believe you may have valid grounds for complaint please read this and the other material on the FOS web site.

Latest Update:....

Office of Fair Trading and the Competition Commission made a large number of provisional findings
[http://www.competitioncommission. org.uk/Inquiries/ref2007/ppi/ provisional_findings.htm].
These included finding that:

• The vast majority of the UK’s 14 million PI policies are sold at the same time as  consumer takes out a loan or other ype of credit.
• Many consumers are unaware that they an buy PPI from other providers and rarely shop around to compare prices nd policies.
• The actual cost of PPI in relation to the ost of the loan or credit is not easy for consumers to work out.
• Because there is insufficient competition hen selling PPI, it appears that consumers are overcharged for PPI by
• over £1.4 billion.

 Do you belive you have been mis-sold PPI Insurance?

Complaint handlers ?  Should you use one or do it yourelf?

We are preparing a page with detailed resources on making a complaint, how you do it and to whom shortly please read it. Using a complaint handler may have some advantages but you are likely to lose a significant proportion of your compensation if your complaint is successful and for no good reason.

This type of policy is currently under investigation by the OFT (Office of Fair Trading) You can read the Press release here. The matter is subject to what is called a "Supercomplaint":
http://www.oft.gov.uk/News/Press+releases/2006/66-06.htm

If you are considering a loan read up on the subject BEFORE ticking the Box to take out the lenders own PPI policy!

What is PPI?

An insurance to cover loan repayments should you find yourself unable to meet them if you fall sick or lose your job.

If your income ceases due to a condition that is covered by the policy, you can make a claim against the policy. Your insurer will if the claim is accepted cover your payments until you are earning again.

These policies are sold with enthusiasm by most vendors of ;loans, credit cards, mortgages and other forms of credit.

Policies invariably have a deferred period meaning that you can not make a claim immediately. This deferred period will often be 30 days but is sometimes longer and most policies will only pay out for a fixed period e.g. 12 months. You need to consider all of these factors carefully especially if your loan is over a longer term

What are the problems?
These policies are often criticised due to their wide range of exclusions bad backs, stress, mental health conditions will often be excluded.

The costs of the cover is high premiums often as much as 25% of the principal on the loan. The premium is added to the loan meaning that borrowers are paying interest on the premium paid for the cover. This means that the debt is larger and the repayments higher. It is quite possible for the insurance to account for 20% of the total amount you repay and up 45% of the total cost of taking on the loan.

You may shop around for the best deal on a loan rate but can find that with the PPI premiums any advantage is lost. It is often hard for consumers to be sure of what the policy is how it works and how it is structured.

Questions to ask:

• Will the lender be adding the premium to the debt and charging you
  interest.
• Is there a deferred period and if so how long you will have to wait
  before you are eligible to make a claim following an accident etc.
• How long a period will the policy benefits be paid in th event of a claim.
• Will your circumstances exclude you from ever making a claim - if you are self-employed or have medical history where been ill in the past you the policy could easily be worthless.

Is it all bad news ?
Insurance can be invaluable should a borrower be unable to meet monthly repayments due to ill health. However, there are alternatives that you should consider:

Stand alone Income protection policies are generally more comprehensive than PPI.

Payments will generally continue until you reach retirement age, rather than stopping after a 12 months.

Talk to an Independent Financial Adviser before committing yourself to what can be a poor value, expensive, less comprehensive cover from the lender.

The citizens advice Bureau has been vociferous in their condemnation of PPI insurance, the way it is sold and structured:

You cam visit the CAB web site at:
http://www.citizensadvice.org.uk