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Payment Protection Insurance (PPI) is often sold under a variety of different names, including those of Accident, Sickness and Unemployment benefit, Payment Care and Loan Protection.
The insurance is effectively designed to pay out a sum of money to help policyholders cover their monthly credit repayments if they are unable to work. This could be due to either an accident, sickness, or because they have become unemployed through no fault of their own.
PPI can be paid as either an upfront ‘one off' premium, which is added to the initial credit amount (therefore incurring the same interest charge), or it may be charged as a regular monthly premium.
Clearly if PPI is sold correctly, it can provide worthwhile cover against unexpected changes. However, customers should be fully aware of a policy's limitations and exclusions before opting for such protection.
Furthermore, consumers are under no obligation to purchase PPI from their credit provider, which is often sold at excessively expensive levels. Indeed, standalone PPI can often be obtained independently at a much lower cost.
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