Payment protection insurance cover – things you should remember

Payment protection insurance, or PPI, is a type of cover that is sold alongside different types of credit, such as loans, credit cards, catalogues, store cards, and the like. The purpose of this type of protection is to cover repayments on debts in the event that the policyholder falls ill or is made redundant and can therefore no make repayments on the debts.

The repayments are covered for a certain period of time with these PPI policies, and this type of cover can offer valuable peace of mind and protection to some consumers. However, it can be expensive, and there are a number of things that consumers should bear in mind if thinking of taking out PPI.

Firstly, it is important to remember that Payment Protection Insurance cover does not apply to everyone, and if you take out cover even though you are not eligible you could end up paying a lot of money for nothing.

You therefore need to make sure that you check the eligibility requirements for PPI and that you do not take out the cover if you are not going to benefit from it. Don’t assume that you will not be sold PPI if you are not eligible, because providers often do not check and you may find that you are sold this costly cover even thought you can never make a claim.

Before you commit to any PPI policy, or any other type of insurance cover in fact, you should always check the small print and familiarise yourself with the benefits and exclusions, as this will enable you to determine whether you are ever going to actually benefit from this cover, and whether you are even eligible for the cover. For example, if you are self employed or retired you will not have any employment income as such to protect, and therefore the cover is no good to you.

The cost of this type of cover can be considerably high, and therefore there are two things that you need to keep in mind. The first is to consider whether you actually can afford the cover – whilst it can provide peace of mind it can also cost a lot of money, and the last thing you want is to end up defaulting on your credit repayments because the cost of the cover has bumped up the repayment by such a large amount.

Another thing you should consider is whether you can get the cover cheaper from another provider rather than from the provider that you are taking finance from.

There has been a great deal of evidence relating to the mis-selling of PPI, and you should be aware of the problems that have been found with the sales of PPI so that you do not fall victim to this sort of mis-selling.

Some providers may try to convince you that you must take out PPI in order to get finance, but this is not true – PPI is an optional extra and is by no means something that you have to take out in order to get finance.

The firm through which you are taking the finance may also try and convince you that you have to take the cover through that particular firm, but again this is not true. You can shop around and take the cover from any provider, so make sure that you find an affordable deal.

In short you need to remember that if you do not want to take out PPI cover then you do not have to, and the choice is entirely yours. You can also take your cover from any providers, so don’t hesitate to shop around to find the best deal and bear in mind that you can get information on PPI from the Financial Services Authority website.

There are a number of other scams and unethical procedures that some providers have used in the past to try and get consumers to take PPI, and again you should keep your eye peeled so that you are not duped into taking out insurance that you do not want.

In the past some providers have provided quotes and even credit to consumers and have automatically added PPI to it, sometimes without the knowledge of the consumer. This has resulted in some consumers paying way over the odds for their borrowing because they have been given PPI cover that they may actually not have wanted at all, particularly given the high cost of this cover.

You should therefore always make sure that any quote that you receive does not include PPI, and you should ensure that you are fully aware of whether any finance that you take includes PPI cover.