The benefits of payment protection insurance

Thanks to improvements in the marketplace, the benefits of payment protection insurance are becoming more obvious to many consumers. Payment protection insurance, or PPI, is an umbrella of insurance products that provide replacement for lost income for employees faced with involuntary redundancy, and sometimes accident and illness. The portfolio of protection plans includes three basic cover types. Income payment protection, mortgage payment protection, and loan payment protection are the three typical insurances that make up the PPI sector.

Though there are some subtle differences in design and intention, the benefits of payment protection insurance are similar. Providers have some difference in products but terms and conditions are fairly consistent. Most policies run for either 12 months or 24 months. Benefits typically begin either 30 days or 90 days after the insured event. Some plans offer backdated protection to the first day of claim.

The real benefit of payment protection insurance is the financial security it provides people when they are faced with unemployment. Many families are faced with budget restraints and rely on consistent monthly income to meet loan and bill obligations and to put food on the table. The maximum allowable protection under most plans is 1500 Pounds or half of your normal monthly income, though this can vary among providers. This may not sound like enough to keep you going without your monthly job income, but these benefit payments are non-taxed. This means the actual net pay is significant.

Payment protection insurance does not have to cost an arm and a leg. For years, many consumers were duped into believing that they had to buy PPI from large financial institutions. In fact, many borrowers either unknowingly, or based on pressure, purchased expensive payment cover from lenders at the point of receiving a loan. Some high street banks notoriously pressured borrowers into taking on the payment insurance as part of package with the loan product. Many even deceptively built the premium costs into the loan repayment in order to hide the true expense of the premiums.

Fortunately, today, the benefits of payment protection insurance are affordable. Following an investigation by the Office of Fair Trading (OFT) and one by the Financial Services Authority (FSA), fines were issued against some high street companies in 2007, and new resolutions have been put into place by the Competition Commission. For instance, loan payment and mortgage payment protection can now only be sold after a 7 day waiting period by lenders who want to sell to new borrowers. This restricts their ability to sell PPI through pressure tactics or deception.

Following the investigations, consumer awareness has dramatically increased. Now, more and more, people are learning that independent insurance brokers offer the best valued products that provide the benefits of payment protection insurance. Brokers sell plans that are 40 to 80 per cent less expensive than those available from financial institutions, depending on the product. These specialists also have a better service offering and maintain a better reputation for fair selling practices and support. Comparing PPI plans is efficient through a broker’s online website.