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Please note that the information provided here is of a general nature
only and for more detailed advice on what you are covered for - you
must refer to your policy or to your insurance company.
Payment Protection Insurance (PPI)
Payment protection insurance, or PPI, is insurance that will
cover monthly repayments on mortgages, loans, credit/store cards or
catalogue payments if you have an accident or sickness and are
unable to work, or you become unemployed.
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.
PPI can provide worthwhile cover against unexpected changes in
your personal circumstances, but bear in mind its limitations and
exclusions. PPI only pays out for a set period of time, generally
either 12 or 24 months - although you may be able to make further
claims later. You may not be able to make a claim for an illness you
already have or have had before. And stress or back complaints, and
possibly other conditions may not be covered, even if you can't work
because of them.
What does PPI cover?
What the insurance covers will vary depending on the sort of
repayments the policy is designed to protect, and on the terms of
the particular policy. The following benefits are typical for
different types of PPI cover:
Mortgage
The insurance covers
your monthly mortgage repayments for a set period of time. The
maximum number of monthly repayments that the insurance company will
make is usually 12, but it can sometimes be 24.
This means that after this period you will have to pay your
monthly mortgage repayments yourself. You can usually make further
claims later on but there must be a gap between them.
Credit and store cards
The
insurance will generally pay off a percentage of your outstanding
balance or the minimum payment each month for up to a year.
Check which option is being offered. This means that you may still
have to pay any balance left after this time. As with mortgages, you
may be able to claim again on the policy after a certain period.
Loans
The insurance will
cover your monthly repayments for the loan - generally for 12 or 24
months. After this period you will have to pay your monthly
loan repayments yourself. As with mortgages, you may be able to
claim again on the policy after a certain period.
If the insurance for any of these products contains life insurance,
then the cover will generally pay off the balance of the debt
covered if you die. If the claim is for disability, the monthly
repayments may be paid to the end of the life of the loan.
Note: You do not need PPI to take out a loan.. If the firm
insists on PPI cover to get the loan, you should consider whether
you really want to take the loan with that lender.
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