Payment protection insurance

Yesterday, in the previous article, we talked about the special case of Mortgage payment protection insurance.

Today, let us focus on the wider topic of Payment Protection Insurance Scheme.
What is it?
Payment protection insurance, or PPI, is insurance that will pay out a sum of money to help you cover your monthly repayments on mortgages, loans, credit/store cards or catalogue payments if you are unable to work. This could be because you have an accident or sickness, or become unemployed through no fault of your own.
This means that the insurance company will pay the monthly repayments (or a percentage of them) on your behalf for a fixed period of time if you become unable to work. It is sometimes known as ASU (accident, sickness and unemployment) insurance, Account Cover or Payment Cover.
PPI can provide worthwhile cover against unexpected changes in your personal circumstances, but bear in mind its limitations and exclusions.


Where might you get it from?
You're likely to be offered PPI by the company when you take out a loan or credit agreement, but you don't have to buy it from them. You can buy it yourself separately from insurance brokers, including over the internet. Shop around to get the best deal for you.
PPI is useful, but you may not always want it or be able to claim on it when you need to.


What are the main features?
• PPI is almost always optional – you should not normally be refused a loan if you decide not to buy it.
• PPI only pays out for a set period of time, generally either 12 or 24 months.
• To claim on the unemployment part of the policy typically you must have been employed continuously by the same company for the last 12 months on a permanent contract.
• You may not be able to make a claim for an illness you already have or have had before. Make sure you check this before you take out the policy.
• Stress or back complaints, and possibly other conditions, may not be covered, even if you can't work because of them. Again, it's worth checking before you take out the policy.
• You have a legal right to cancel the policy and get a refund within 14 or 30 days of taking it out.
Tomorrow, let’s talk about how and whether you should take this insurance.