Protecting your finances with payment protection insurance

What is payment protection insurance? PPI is an umbrella terms for a group of policies that provide you with a tax free income every month in the event that you lose your income due to the unexpected. This could be involuntary redundancy or incapacity die to accident or illness. By providing a monthly sum to you this way, a payment protection insurance plan ensures that you do not struggle financially.

Probably the most common type of protection insurance policy is mortgage protection payment insurance (MPPI), that will help you meet your mortgage repayments in the event of accident, sickness or redundancy.

Other types of payment protection you could consider
Mortgage insurance is not the only form of payment protection insurance available. If you want to have an income that you would be able to spend as you wanted in the event of incapacity or involuntary redundancy, then you might want to give some thought to taking out income payment protection. The policy would provide a sum of money, usually up to £1,500 or half of your gross monthly income. You can then use this money as you wish and distribute it towards any payments that need meeting.

Should you have loan repayments to make each month then you might want to consider taking out loan payment protection. The sum of money from this policy would go towards you maintaining your repayments each month which would stop debt building up.

Ensuring you get the best deal
One of the best ways to ensure that you get the best deal on your cover is to compare the premiums with a standalone provider. Of course it does not matter how cheap you can get the protection if you would be ineligible to claim and with the standalone provider you can check for suitability online.

As you can tailor the policy to suit your needs you would also only be paying for protection that you need and choosing the events means the cost of the insurance is lower.

Finally, when choosing your payment protection insurance plan, you should check the terms offered by the provider before you pay for the policy, as they can differ quite wildly in both price and cover offered.

Top tips when buying payment protection insurance

When buying a payment protection insurance policy, there are things to bear in mind to ensure that you get the right deal.

But first of all, what does the cover do?

In a nutshell, payment protection insurance - PPI – provides you with a tax free income every month if you lose your own due to involuntary redundancy, or accident or illness. It helps you keep financially afloat at an otherwise difficult time.

So how do you choose the right cover?

The main considerations when choosing cover are:

• Price – buying from a standalone provider rather than a high street bank or lender can make substantial cost savings
• How long do you want benefits to run for? (most policies run for 12 or 24 months in the event of claim)
• How soon can you make a claim after being made redundant or incapacitated? (this can vary among providers from 30 – 90 days after the covered event happens)
• And, eligibility. This is very important as buying a policy that you will not be eligible to claim on means it is not worth the paper it is written on. Here we look at it further.

Checking for eligibility
You will need to check to ensure that you will be eligible to make a claim against any policy you were thinking of taking out as all come with exclusions. The amount of exclusions could vary with some providers adding in just the most common ones and others including numerous.

The most common exclusions include you having to be in full time and have been working for 6 months at least prior to applying for the policy.

You also typically need to be living in the United Kingdom, the Isle of Man or the Channel Isles in order to take out cover.

Other possible exclusions
Do you be self-employed then you will need to check the cover very carefully before taking it out. Usually you will only be eligible to claim if you were to have to cease trading permanently and through no fault of your own.

You will also need to check carefully if you have an illness that is pre-existing as there can be a great deal of exclusions surrounding any ongoing illness that do leave you unable to work.

In summary, by looking at the your payment protection options carefully, you can choose the right cover for you.

Payment Protection Insurance – A Lifeline in Difficult Times

Being in debt without any means to repay it can wreak havoc to your personal financial security, not to mention your credit rating. This scenario can easily arise when, through no fault of your own, you are unable to earn an income due to involuntary redundancy, illness or a serious accident. It is in such a situation that an insurance product called ‘Payment Protection Insurance’ (PPI for short) can be a lifesaver. The basic function of loan payment protection policy is to offer consumers a way to keep up loan repayment for a period of 12 to 24 months even if they are not working.

There are several different kinds of PPI policies and the terms and conditions and benefits will differ from policy to policy. It is therefore quite wise to shop around in order to find the product and the level of cover that will be right in your specific circumstances. In general you have to be between 18 and 65, in full time employment and a UK resident.

It is very likely that you will be offered PPI when taking out a new loan. It could however well be that you will do better by shopping around a bit as some loan providers tend to regard their clients as a ‘captive audience’ as far as selling insurance is concerned. It is however possible to take out insurance on the ‘open market’ (you can do this by speaking to a broker or directly to an insurer) usually at much better rates than those offered by loan providers. It is very important to remember that a loan provider cannot force you to take out the policy that it issues (or recommends). There is therefore nothing to prevent you from trying to find a better deal.

Payment for a PPI is through a series of monthly payments. If you are paying on a monthly basis it is very important to keep up regular payments as non-payment could lead to a policy cancellation.

PPI policies will normally pay out in cases of incapacity or redundancy. In the case of loans it will cover the monthly payment for the agreed period. In making a claim you will have to prove that the main conditions for the policy to be paid out (e.g. that you are unemployed and/or unable to work) have been met. This means that it will be necessary to lodge supporting documents like medical certificates or a letter confirming the termination of your employment to the insurer. You may also be required to prove that you did not lose your job because you:

• Resigned
• Took voluntary redundancy
• Broke the conditions of your employment

The extra money that you will have to add to a loan repayment to take out PPI might seem like an unnecessary expense as you are paying it. However having a policy in place can very often be the one thing preventing temporary unemployment turning into a full-blown and catastrophic financial crisis.

Summary:

• Payment Protection Insurance (PPI) is designed to protect borrowers against the inability to repay their debts due to unemployment or incapacity.
• PPI can be purchased either through the loan provider or on the ‘open market’
• In some cases the premium for the PPI policy is added to the loan while a monthly payment is required in others.
• Upon claiming under a PPI policy it will be necessary to prove that you actually meet the conditions for the policy to pay out.

Fast Facts about Payment Protection Insurance

Payment Protection Insurance (PPI) is a type of insurance that is often sold alongside a specific financial product (e.g. a loan, credit card or mortgage) as cover against the inability to make repayments in case you lose your income through an accident, a medical condition or unemployment. Policy terms vary but most policies will normally pay out a fixed benefit over a set period of time (e.g. three months, six months or up to twelve months).

You will normally be offered PPI as a matter of course whenever you take out a new credit card, loan or mortgage.

PPI can bring great peace of mind to those taking up significant financial commitments. However, great care should be taken to take out a policy that is just right for you in your specific circumstances. A first step towards doing this would be to not simply take up the policy offered by your financial institution straight away but to, instead, do a bit of homework first. This is even more important in light of the fact that there have been several instances in the past where PPI policies where mis-sold by unscrupulous lenders, leaving people with the impression that they were adequately covered when this was actually not the case. The following few points can help you to decide on the best PPI policy:

• Realise that you have options: Some lenders will make it sound as if it is compulsory that you get PPI and also that you have to get it from them. This is very rarely the case. If you do decide upon getting PPI you are well within your rights to get it as a ‘stand alone’ product from an insurance company of your choice.
• Determine the true cost: Some financial institutions ‘hide’ the cost of PPI by simply adding it to your repayment and not showing it as a separate amount on your statement. If this is the case you are most probably paying over the odds. Find out by asking to see a statement with the PPI costs separated out.
• Make sure that the cover is right for you. Some policies are very restrictive in their wording (e.g. Only covering those who are made redundant. This will obviously be quite useless in the case of those who are self employed.)
• Read the fine print: Some PPI policies have so many conditions and exclusions as to make them almost worthless. You can protect yourself from a very nasty surprise by making yourself aware of any possible exclusions before signing on the dotted line. Usually this would mean going through the ‘fine print’ of the policy document with a find toothed comb.

You may get the impression from the above that PPI is generally is not worth it. This is certainly not the case. A good PPI policy, tailored to your individual needs, can contribute a great deal to your peace of mind. It is just very important not to succumb to the ‘hard sell’ that often accompanies the marketing of these products and to instead make a choice on your own terms.

Summary:

• PPI policies offer protection against the inability to make repayments on certain financial products due to certain specified circumstances.
• PPI is not compulsory and it is possible to take it out as a ‘stand alone’ product
• Great care should be taken to make sure that the PPI policy that you choose is right for your specific circumstances.
• Some PPI policies are hugely expensive, it would therefore be worth your while to ‘shop around’ a bit.

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.

The Benefits of Payment Protection Insurance

In 2008 it was reported in The Telegraph that the average Briton now has £33,000 worth of debt under their belt, compared to £17,000 in the year 2000 . While this figure includes mortgages, it’s still a large amount of money every month that is taken up in the form of repayments to various banks, building societies, credit cards and personal loan firms. However, few people stop to consider what would happen to their ability to meet these payments should they be unable to work due to injury or illness, or find themselves made involuntarily redundant.

Loan payment protection insurance is designed to help you in case you find it difficult to honour your monthly debts as a result of being unemployed. For what is often a small fee with regards to the amount of cover obtained in return – usually just a couple of pounds per hundred pounds of cover required per month – you can have your repayments protected for a period of between 12 and 24 months, according to most policies. Loan payment protection will help make sure that your debts don’t get out of hand even while you don’t have a steady income, protecting you against receiving bad credit ratings, CCJs, or even – in extreme cases – repossession or foreclosure of your property.

One of the main problems of finding yourself out of work when you have loan repayments looming (aside from the obvious financial difficulties) is the worry that it can cause. The stress of not knowing if you’re able to make the next payment to your bank or credit card company can have a severe impact on your health, making the problem worse. If you were to know that your debts were protected for a period of up to two years, it would be an enormous weight off your mind, and would allow you to focus your attentions more completely on getting back to full health. If the reason you’re off work is redundancy and not illness, payment protection insurance can still help – making sure your debts are under control would help improve your morale, as well as granting you a little bit of financial leeway; instead of taking the first (possibly unsuitable) job that comes along just to pay your bills, you have a little more time to find a job that really works for you. Depending on government-funded financial aid packages often will not cover all of your needs, and so a little extra provided by an independent, specialist mortgage service can really make a difference if times get tough.

It’s as a result of all of this – the security and peace of mind that come from knowing you’re safeguarded for the future, as well as the firm financial benefits of keeping your repayments protected – that so many people are choosing loan payment protection policies as a means to invest in their future, and avoid any unexpected disaster knocking them off-balance financially. While you can’t predict or even avoid many medical or employment-based upsets, insuring your loans can be a great way to offset a lot of the stress they can cause.