Payment protection insurance (PPI) is a form of
One of the main changes that were implemented recently has been the prohibition of the sale of single premium PPI; what that means is in the past when you took out a personal loan policy and if you took PPI at the same time, the cost of the insurance policy was added to the loan amount, and you effectively 'borrowed' a lump sum on top of your loan to pay for the policy, with interest and the same early settlement charges that applied. This meant the insurance premiums can add between 13%-56% to the total cost of the loan. Many lenders took action to actually stop selling single premium payment protection insurance as soon as they saw the writing on the wall and switched to monthly repayment policies which are much fairer on the borrower.
With a monthly repayment policy there is no reason why at any stage you should not be able to stop the policy; it's not like home insurance or motor insurance which in most cases is mandatory, it is merely an add-on on top of the loan. If at any point your circumstances change, perhaps you get a better paid job or a more secure job, you can then cancel the policy.
One of the reasons why PPI has been under the spotlight has been because of concerns over the way it was sold; policies tend to include a number of exclusions amongst the fine print. For example the insurer may not honour your claim if you're self employed or if you are a housewife or student, things of this nature. Certain medical conditions are excluded. Other mis-selling techniques included;
Adding the cost of the payment protection insurance without the customer's knowledge or consent.
Telling the customer that PPI is compulsory.
Not asking the customer about previous medical conditions that means the PPI is worthless
Not asking the customer about their employment status which means the PPI is worthless
It is important therefore, before committing yourself to any PPI, to read carefully the key policy information. This will explain in detail, the main features and benefits of the policy, and how long the insurance protection lasts.
It is calculated that over 90% of all payment protection insurance policies issued have been mis-sold, with the result that many UK loan and credit companies have been fined.
So is reclaiming PPI a good idea? In my opinion yes it is. A PPI reclaim would lead to a large cash refund including interest and could help reduce your debts. If you require cover then we suggest purchasing it from an alternative provider.