Payment Protection Insurance-part II

This is part II of the article Payment protection insurance

What should you do while planning to take Payment Protection Insurance?

• Think carefully about the risks you could face while paying back a loan, mortgage or credit/store card and whether taking out PPI would be to your advantage. If you had an accident that stopped you from working, would you have enough savings to be able to continue paying off the loan?

• Consider whether you have other insurance which already covers you (for example through your employer), or whether other types of protection insurance may be more appropriate.

• Don't be pressurised into buying it - you don't usually have to take out PPI to get a loan and you don't have to buy it from the same place you get your loan from.

• Check online forms when applying for loan or credit online. Sometimes PPI is selected by default and you will need to change this option if you don't want to buy it. You should also print out or keep copies of completed forms in case you need to complain or make a claim in the future.

• Find out whether the firm is giving you advice, if not, consider whether you need advice. Getting advice means that the firm should recommend a PPI or other policy that meets your needs.

• Find out whether the policy is a single or regular premium. If you buy a single premium policy you pay a lump sum of 3-5 years' worth of premiums in advance. This amount is added to the sum you borrow and attracts interest, so you'll be paying more over the long run.

• Think about what you would do when the claims payments stop and you are still unable to work. How would you pay the rest of your loan?

• Check to see what you will be covered for and what won't be covered – for example any exclusions relating to the nature of your employment or your medical history.

• Check what you will get back if you cancel the policy or repay the loan early.

Ask the salesperson to explain the terms and conditions of the policy and make sure you read the keyfacts Policy Summary document – especially read the exclusions carefully.

In the next article, let’s cover some fine details and more information on Payment Protection Insurance