Aug 26 2008
Payment Protection Insurance policy
Payment protection insurance policies are sold along with mortgages, loans, credit cards etc and are meant to cover the due repayments in situations like illness or sudden unemployment when the individual is not able to pay the same from his own means. Around 2 million such insurance policies are issued to individuals who but may never be able to make a claim. This payment protection insurance policy though is not applicable for individuals who are either above 65 years of age, those who are self employed or working on a contractual basis and to those already suffering from illness. There are some features of PPI which are to be understood carefully before opting for this scheme. This payment protection insurance policy pays only for a pre defined limited amount of time which generally is one year.
In certain cases it might extend up to two years. PPI is meant to be considered as a ‘single premium policy’ when sold along with a finance agreement of any kind. This means that a sum of money which is meant to cover the cost of insurance is subsequently added to the amount you have borrowed. This makes you end up paying interest on both the loan as well as on the insurance premium. These payment Protection insurance policies last for 5 years only. This effectively means that in case your loan period stretches longer than 5 years then too you still keep coughing up the interest for the policy which as of date no ceases to exist.
Also, in case of the payment protection insurance policies which are meant especially for credit cards, the policy covers only the minimum amount due for payment each month on the card. But it is not all good news surrounding these payment protection insurance policies. A large chunk of consumers availing this policy during the period of last five years have complained of at least one ‘significant exclusion’ which goes on to prevent a successful claim from taking shape.