Payment protection insurance (PPI) is a form of income protection that covers monthly debt repayments if you’re unable to work.
This could be due to sickness, an accident or involuntary unemployment.
Typically, you can protect up to 70% of your annual income and a PPI policy will provide payouts for up to 12 months if your claim is successful. However, conditions will differ between policies.
This is completely dependent on your circumstances. If you’re unlikely to be able to make your existing debt repayments if you find yourself out of work, you may want to consider PPI.
PPI has had a bad reputation since the mis-selling scandal, but it can be a useful form of income protection
We only need a few things from you to get started:
What you want to protect and for how long, plus your gross annual salary
Such as your name and date of birth
What you do for a living, how many hours you work and who you work for
We’ll show you your PPI quotes, so you can choose the right policy for you
Unfortunately, financial institutions mis-sold payment protection policies to customers for years. People were sometimes sold it as part of a bundle or pushed to take it out, without ever actually realising what they were paying for.
Since the story of the scandal broke in 2011, billions of pounds have been paid out to customers in compensation.
This gave PPI an undeserved bad reputation, but it can come in handy if you find yourself out of work.
In the past, PPI was mis-sold alongside products like loans or credit cards, but companies are no longer allowed to do this.
If you’re going to take out PPI, find a policy that’s right for you and avoid policies that are bundled with loans – they don’t always offer you the best deal.
Here are some things you’ll need to think about before you take out a PPI policy:
This could be credit card, mortgage or loan repayments
You’ll need to keep paying until the deferred period ends and the policy kicks in
So double check your policy before you take it out
Meaning you can’t claim for something you’ve already got
You may be able to manage with just this
If you’ve got enough, you might not need PPI
Look at different types to see what is right for you
If you made an insurance claim on a PPI policy and your insurer rejected it, you’ll have three years from this point to make a complaint.
The deadline for all PPI complaints is 29 August 2019.
Mortgage payment protection insurance (MPPI) is another type of income protection.
It can help to pay for your mortgage if you’re unable to work and will usually pay out for a year at most.
It depends on your policy but generally PPI will cover you up to the age of 65.
There may also be restrictions if you’re self-employed or on a temporary contract. Be sure to read all the terms and conditions before you take out a policy.
If you’re on unemployment benefits, PPI is probably not right for you – you may have to prove you’ve been in continuous employment for a certain amount of time.
However, if you’re on any other sort of government benefits, you should speak to an independent financial adviser to discuss what would be best for you.