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You and your money
When you take out a loan or apply for a credit/store card, some lenders try very hard to persuade you to take out 'optional' payment protection insurance (PPI). What is this and is it right for you?
Basically, it's designed to cover your monthly credit repayments if you have an accident or sickness and are unable to work, or you become unemployed. As such, it can provide worthwhile cover against unexpected events, but like all insurance policies, it has limitations and exclusions.
The salesperson must tell you how much PPI costs and how it is paid for. And you have a legal right to cancel the policy within 14 or 30 days.
When deciding about PPI, here are some things to consider:
- How long does it pay out for? Usually it is for a set period of 12 or 24 months.
- You may not be able to claim for an existing illness or one you've had before.
- It may not cover conditions such as stress or back complaints, even if you can't work because of them.
- Claims payments might affect your right to government benefits - check with your local Jobcentre Plus.
- Are you already covered by other insurance? For instance, your employer may have a "no compulsory redundancy" policy.
- Would taking out PPI be to your advantage? Read the Key Facts policy summary and check out the terms before
you sign up.
Remember, you don't have to take PPI from the firm you are borrowing from, or at all. You can buy it separately from insurance brokers or over the Internet. Shop around for the best deal.
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