PPI - Beware

By Barry Loughran

When taking out any type of finance deal, you will almost definitely be offered payment protection insurance of some kind. This is an insurance policy which acts as a safeguard if you fail to miss your repayments through no fault of your own such as losing your job or suffering from an accident/illness. Many people have this sold to them without understanding the potential positive and negative/aspects by seemingly pushy salesmen at the time they take out their loan.

The banks make a big chunk of their profits from PPI and reports show that they have overcharged the UK customers around £1.4 billion which has lead to the charity Citizens Advice issuing a 'super complaint'.

The claims process can at times be lengthy depending on the issuer of the policy and you should be aware that it only covers the costs incurred from your loan.

An expert gave advice along the lines of making sure you are aware of what the policy offers and what alternatives are available that could suit the same purpose. Often consumers are sold these products without gaining any understanding of what they are taking out. Whereas, if they were better informed they would be able to see the possible merits of the policy. If you choose your policy unwisely you could find it doesn't offer the value you were expecting.

PPI can be a benefit to some as accidents do happen, as long as you research your PPI and fully understand it, you will not have any unexpected surprises.

An alternative to PPI is to save around three to six months worth of wages in a high interest saving account which can easily be accessed. This would cover you (short term) for accidental illness or job loss. This may not be as easy for everyone. For long term cover you may want to consider income protection cover as, if you make a claim, it will payout until your retirement date if terms and conditions of the policy are met.

You should ensure you are aware of all the details of any loans you take out including the monthly payment and interest rates applicable. This applies to both secured loans and unsecured loans and will ensure you get the most out of your cover.