Payment protection insurance is meant to help you pay out monthly loans, mortgages and credits if you are unable to work. You do not have to own a PPI. Many loan lenders offer a PPI policy when you are making an application for a loan. Before you take on PPI insurance, you need to read all the requirements and make a clear choice based on your finances and future. The PPI should be quoted and applied separate from the loan.
When you sign up for a PPI, your insurance company is obligated to make a number of fixed monthly payments for a period of time when you are no longer working. The insurance company only covers a minimal repayment of the amount you owe. The amount they pay won’t reduce your loan, mortgage or insurance by that much. Some PPI policies do not pay out immediately, they can take a number of weeks before they start working
You may not need a PPI cover if you have a guaranteed regular income, you have a paid sick leave form your employer, your job is secured with a risk of redundancy, and you have a similar insurance policy such as income protection, life and serious illness. Before you decide to take on this type of insurance, check if you are eligible. You may not be eligible for a PPI claim if you are under 18, over 65, have lost your job for less than 16 hours, self employed, on a temporary contract, have and existing medical condition and can’t work because of common and simple health and psychological issues.
You should consider several things before you take out a PPI. Do you really need the cover? If you have a similar cover on your life insurance a PPI is not really necessary. If the full cost of the cover will affect your financial stability, do not consider the PPI. If you fall out of the job, will a PPI save you from major financial issues or just minor ones?
If you are taking a loan, a PPI will cost you about 10% of the monthly loan repayment. If you are used to paying out your credits in one large monthly payment, you should not consider taking on a PPI. Your PPI premium can increase depending on the terms of your provider. Check with your lender before you sign any PPI agreements.
Depending on the type of policy you have, you can make more than one PPI claim. For most lenders, a PPI claim due to medical issues will automatically be the end your PPI premium. For some, if you make other claims in future you can pay for the premium and the policy will remain the same. Before signing any agreement with your lender, check if you can claim your PPI more than once.
Finally, you should be aware than you can cancel your PPI whenever you want to. If you pay your loans early and decide you no longer need the policy you can ask the creditor to cancel the policy.