Should You Get Payment Protection Insurance

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Payment protection insurance (PPI) policies are designed to help you repay your debts (such as mortgages, loans and credit cards) if you have to stop working because: you have an accident or become ill; or you become unemployed and you did not expect this to happen when you took out the policy. There are many types of PPI. The level of cover can be different from policy to policy. Always read the policy summary for details of the benefits and the main exclusions (the things the policy doesn’t cover). If there is anything you are not sure about, you should always ask for more information before you buy. What am I covered for? This insurance usually covers your repayments for a fixed period of time – often 12 months – if you have an accident, get ill or lose your job. In some cases, the policy provides cover if you die or are seriously ill. Can I claim more than once? You need to check each policy to see if you can claim again if you return to work for a specific period of time and then lose your job, become ill or have an accident again. How much does PPI pay out? For mortgages and loans, the insurance payments usually cover your monthly repayment. For credit cards, the insurance claim payments always cover the minimum monthly repayment, and some pay more. What am I not covered for? PPI does not usually cover any medical conditions you know about at the start of the policy. It will not cover every type of illness. You cannot normally claim for unemployment if you: • resign; • accept voluntary redundancy; or • lose your job because of something you do that breaks the conditions of your employment contract. You usually have to have had the policy for a certain period of time before you can claim. There could be other things your policy does not cover, and insurance payments may be limited. It is important you read the policy summary and the policy document to check exactly what is and is not covered. What do I need to do to make a claim? If you need to claim, you may need to provide evidence to support your claim (for example, medical certificates if you are signed off work by your doctor). You may have to pay for the medical certificates yourself. If you are claiming because you are unemployed, you will need to have signed a Jobseeker’s Agreement and show you are looking for work throughout the period of your claim. How do I pay for PPI? You pay premiums either every month or as a single payment, depending on the providers and the type of credit you are taking out. For single payments, the cost of the insurance is usually added to your loan and, as a result, you may pay interest on both the loan and the insurance premium. There are many reasons why you should give income payment protection insurance some thought. With a policy behind you, you are able to have a replacement income each month if you should lose your own by falling ill or suffering an accident. If you were to become unemployed by such as redundancy then you would also be covered by your policy which would leave you stress free regarding your finances. You would be able to meet outgoings just as you did when you were working and this would allow you to think about making a recovery or to find work again. Being able to continue meeting your mortgage repayments each month is essential if you cannot and you get behind on your mortgage repayments then the lender will take action against you. If you have not got the money to be able to come to an agreement with your lender then the lender will have no choice but to take the first steps towards repossessing. Income payment protection insurance can provide you with an income each month that would cover up to so much of your own income each month. This would allow you to have enough money in the bank for the direct debit to go out each month for your mortgage. Of course you will have many other outgoings to make, you could for instance have to repay loans or borrowings made on credit cards. Your heating and lighting bills, council tax and all other essential outgoings would have to be maintained. By paying a premium each month you would have the money needed to take care of all of these outgoings. Your premium would be based on how much of your income you wished to insure against up to a certain amount. You would then have to stand to so many days once you had become unemployed or had been declared incapacitated. You have to compare the terms and conditions of the policy as this is where you can find when your policy would last and for how long it would pay. Providers will usually ask for a deferment period of 30 to 90 days before paying and some will backdate cover to the first day of unemployment or incapacity. Some will pay out for a period of 12 months before the policy ceases and with others it could be for up to 24 months. After the period has ended it is assumed that you will have found work or will have made a recovery and be back at work. Income payment protection insurance does need to be shopped around for if you are to get the best deal. Standalone provider's offer the cheapest premiums and even these will vary. When comparing quotes to protect your income always look at the terms and conditions to see what exclusions there are in the policy. All policies will have some and these must be checked against your circumstances. The amount of exclusions to be found in the policy will depend on the provider with some adding in more than others.