Payment protection insurance (PPI) is a generic term that is used to describe loan payment protection insurance; mortgage payment protection insurance (MPPI); and income payment protection insurance. All three of these protection policies can be taken out for a premium each month and will help safeguard against the financial ramifications of becoming unable to work due to recovering from an injury or prolonged sickness that sees a loss of income; or, unemployment via redundancy.
All types of PPI policies will give the policyholder a monthly income that is tax-free and which can be used to service specific debts (such as a loan or mortgage) or general day to day costs (in this case, income payment protection could be ideal). There is a waiting period before a claim can be made and that is usually between 30 and 90 days after becoming unemployed or unfit for work.
Some payment cover providers will back pay the insurance claim to the very first day of becoming unemployed or unfit for work, so look out for this feature when choosing your cover. Once you have started to receive the policy benefits, it would then continue to provide financial security and peace of mind for between 12 and 24 months. Obviously, if you get back to work within this period, then the benefits will stop paying out.
The cost of the PPI cover will typically be based on how old you are at the time of applying for the insurance as well as what level of protection you want (eg accident and sickness only; unemployment cover only; or all three). However, this can vary greatly depending on where you buy the insurance. The cheapest quotes are typically given with a specialist standalone provider of payment protection such as British Insurance. At the other end of the scale, historically, the high street banks and lenders will usually offer the dearest quotes.
So is PPI a consideration for you? Consider how much your outgoings are every month and ask yourself what would happen if you were to lose your income. How would you manage to carry on staying financially afloat? Payment protection insurance could be the solution, providing an income to replace your lost one, up to a certain amount. You would still be able to continue paying essential bills without financial worry and stress.
For many years I have been a staunch campaigner against the major names in finance who, I believe, rip-off their customers by selling over priced, often unsuitable payment protection insurance (PPI) cover.