What you must know about PPI

Payment protection insurance is a type of insurance that can be used to settle your outstanding debts, obligations, or overdraft temporarily. It is put to use when a policyholder is rendered unable to pay his current debts such as credit card arrears, car & bank loans, and overdrafts. If you want to know more, then read on to find out how to acquire payment protection insurance and the recent problems that policyholders have encountered with it.

Acquired from credit companies and banks, payment protection insurance is paid via premiums and interest rates. Premiums can be paid off either in monthly increments or upfront. The price of the premiums and interest rates depend on a number of factors namely: job stability and risk of termination, amount of loan, term of employment, age, economy and health. These prices can be changed even after parties have already agreed to a price. The prices are adjusted due to changes in the aforementioned factors.

Similar to many other types of insurance, a payment protection policy has eligibility and exclusionary clauses that prevent an individual from making an insurance claim. When you apply for a payment protection insurance you must not be retired, self-employed or unemployed, and you must not be suffering from an existing medical condition. Aside from these, there are also situations that might disqualify you from making an insurance claim when you’re already a policyholder. If you are rendered unable to work within the first 60 days of the policy, an insurance claim cannot be made. The same goes for being rendered ill from a medical condition that: you knew about whether medically diagnosed or not; persist within the first 12 months of the policy; is related to stress or back problems. Also, if you are rendered unable to work due to pregnancy, an insurance claim cannot be made unless there are medical complications that accompany your pregnancy.

The problems that most policyholders encounter with payment protection insurance is that the prices of the premiums and interest rates have been altered without their insurance provider and/or company communicating the same to them. Whenever a term or provision of a contract is amended, a party who is making the amendments must communicate the same to the other party in order to reach an agreement. Credit companies have intentionally done so to their policyholders and many have claimed damages.

Another problem that some have encountered is that the eligibility and exclusionary clauses were not fully explained or were even mentioned to them when they applied for the contract. Some policyholders found out that they were not even qualified when they applied for payment protection. Also, there are some who had their insurance claims rejected due to exclusionary clauses that were contrary to law and legal conduct. This is actually the reason why many have been making damage claims against their credit companies and banks that they acquired their payment protection insurance policy.

There are many other problems involving ppi, most of these involving its sale. 90% of adults in the United Kingdom have payment protection insurance in some form or another and 40% of those policyholders do not even know that they have one. This is so because many credit companies and banks failed to tell their customers that a payment protection insurance policy was included in a credit product that they have purchased. Other credit companies cloaked their ppi under the guise of a different name. The sad thing about this is, payment protection should have been a valuable asset for one to have in theory. However, the malpractices employed by credit companies have forever tainted its name.

Payment Protection Insurance – does it protect you?

The concept insurance in general, and of  payment protection insurance in particular, has always stirred a lot of sentiments from different market forces, may it be consumer groups, government agencies, and industry watchdogs. This is because payment protection insurance companies have the lowest level of approval rating  from its own consumer base. For starters, this insurance policy positions itself as the vanguard of debtors who are in the middle of outstanding loans, mortgages, and credit purchase transactions in the country. To give you a concrete picture of what happens in the process of purchasing it, this type of policy ensures that in the event that the debtor consistently fails to pay the debt he put himself in, the insurance company will take care of the payment in full or in part, for a certain period in time.

While it is enticing to think that a debtor does not have to worry about being laid off from work, being involved in an accident, as well as getting a disability that renders him or her ncapable of working under regular circumstances, the practice of companies is far from the front that they have shown their customer base. As a matter of fact, and little do people know about it, that payment protection insurance policies are already an automatic requisite for people who want to purchase a loan to begin with. Yes, these policies are sold to people even without their full consent to it, especially if the lending institution requires the purchase of PPI before the loan is even approved. When this happens, the debtor is put in a very compromising situation; on the one hand, getting the loan may be the answer to the financial problems he or she is experiencing, while on the other hand, purchasing the policy can mean increasing the amount that you have to pay for the loan. If you actually look at the original amount, it would be significantly lower if you remove the amount that the policy adds which can range from eleven to fifty four percent of the original amount. This is what makes the practice really dubious for some, because more people are stuck in a sea of debt just to pay for the interest rates of the policy . See,when you purchase it, you have to pay for an upfront premium. In reality, what you pay for are the interest rates that are actually pegged on the amount of loan.

Furthermore, payment protection insurance companies are under fire for the practice of selling the policy. Given the crucial part that they play in the lives of people who are in deep need, you would expect that they are socially responsible and will enable the depressed and indebted individuals to make fully rational and well informed choices. But, sadly enough, payment protection insurance companies have been accused of misinforming their clients to entice them to purchase their product. Furthermore, there have been listed cases wherein the company prints the particularities of the policy in small fonts that make it impossibly hard for consumer to check the contract thoroughly. This leads to consumers claims being rejected – sometimes arbitrarily – by the company, because of the presence of a lot of unchecked exclusionary clauses that specify pre-existing conditions where the company is not supposed to be liable for whatever happens in the lives of its policy holders. In the end, there is a general consensus that the practice of these companies needs to be regulated, and a government intrusion is necessary for reforms to happen. Until then, consumers will just have to bear with the difficulties of payment protection insurance.