What is it?
Payment Protection Insurance, or PPI, is insurance that will pay out a sum of money to help you cover your monthly repayments on mortgages, loans, credit/store cards or catalogue payments if you are unable to work, or become unemployed through no fault of your own.
This means that the insurance company will pay the monthly repayments (or a percentage of them) on your behalf for a fixed period of time if you become unable to work. It is sometimes known as ASU (accident, sickness and unemployment) insurance, Account Cover or Payment Cover.
With single premiums, you pay the full cost of the insurance up-front. This premium is usually added to the total value of the loan with interest charged on top.
PPI policies will generally include a number of exclusions or conditions that will prevent you from claiming on the policy, or being eligible in the first place. Here’s a sample of some of the main exclusions:
• You are under 18 or over 65;
• You work less than 16 hours a week;
• Self employed
• Pre existing medical conditions
• You are employed on a temporary or contract basis;
• You are aware you may become unemployed;
• You have an existing illness; or
• You have stress or backache.
source - FSA moneymadeclear
The financial regulator has been fining many PPI companies for “not treating customers fairly”. The Competition Commission has investigated the PPI market and demanded that they ban all sales of single premium PPI policies, and selling PPI within a week of selling a credit card or a loan.
The Financial Ombudsman (FOS) has also complained to the regulator believing that lenders are "deliberately trying to obstruct the Ombudsman process" with some lenders rejecting all reclaim attempts.
The following lenders have already been heavily fined.
• Alliance and Leicester (A&L): Fined £7 million in Oct 2008
• Egg: Fined £721,000 in Dec 2008
• Liverpool Victoria: Fined £840,000 in July 2008
• Land of Leather Ltd: Fined in May 2008
• HFC Bank, also trading as "Household Bank" and "Beneficial Finance": Fined in January 2008
• Capital One: Fined in February 2007
• GE Capital Bank Ltd: Fined in January 2007
• Loans.co.uk: Fined in October 2006
An in depth summary of PPI from the Association of British Insurers can be found on our LINKS page on this site.
Full details of all lenders fines can be found on the FSA website.
|
