Debts are a virtual fact of life for most people, even those in relatively comfortable circumstances. Large expenses such as home extensions, new cars, and even university fees for children make some form of borrowing almost unavoidable for many ordinary British people. Some careful budgeting is normally enough to ensure that these commitments do not get too out of hand and start to cause unnecessary stress and anxiety. However, life can sometimes be unpredictable and will throw up some unfortunate events. Jobs can seem secure one minute, and then letters of redundancy suddenly start to arrive. Even worse, a sudden and serious illness can see someone struggling to make ends meet without their salary after any sick pay arrangements expire. Although many of these types of events are by no means certain, they are not uncommon, and therefore some people choose to guard against the inability to meet commitments with the help of payment protection insurance policies.
Payment protection insurance, or PPI as it is sometimes known, is a broad term for policies which step in and pay cash sums towards someone’s debts in the event they lose their income through no fault of their own. ‘No fault of their own’ will typically include circumstances such as sickness, accident, or involuntary redundancy.
Three common types of payment protection include income payment protection insurance, mortgage payment protection insurance and loan payment protection. All of these types of cover offer similar benefits for working people who are concerned about the future possibility of losing their income.
Income protection acts as a supportive supplement for someone’s general outgoings, mortgage payment protection helps towards the cost of a home loan, and loan protection is geared towards general monthly debt obligations.
All of these types of payment protection insurance will pay a regular sum into someone’s bank account to help them continue to meet financial commitments while they get back on their feet. Note few policies cover 100 per cent of an income or mortgage payment or similar. They are normally only designed to help with a slice-how big a slice depends on the individual policy and individual insurer.
Payment periods continue for 12 to 24 months depending on the individual provider, and payments will stop if the person in question manages to find work or get better and return to their job before this period runs out.
This part of the insurance industry is currently under investigation by the Competition Commission after some well-known high street lenders were fined for mis-selling policies and this has seen some people shift towards more independent cover companies such as the ethical British Insurance.
Company Managing Director Simon Burgess said: “Payment protection insurance is a potential lifeline in the right circumstances. Many policies can be tailored to an individual’s needs and cover can be straightforward and inexpensive when provided by independent specialists like ourselves.”
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