What is PPI?
If you have every bought a home, or made any other major purchase, you probably already have PPI or Payment Protection Insurance. PPI is usually sold by your lender to protect your purchase in the event of your death, or a major illness that would prevent you from earning money to repay the debt. PPI coverage ranges from paying your debt for up to 12 months in the case of unemployment or illness, or if tragedy were to happen this type of insurance pays off the balance of your loan, eliminating your debt, to the company that issued the loan.
How PPI Works
Lets say you are buying a home, often times your lender will offer to sell you PPI at closing. Your mortgage payment will include this insurance if you choose to purchase it. If one of the covered incidence occurs you, or your family, would file a claim with the insurance carrier. Unlike other types of insurance, your PPI benefits are paid to the company that issues the loan and not to the individual who purchased the policy. The insurance basically pays the lending institution for loss if you are no longer able to make your payments to them. Payment Protection Insurance will make the policy holders payments or, in some cases, eliminate the debt owed if repayment cannot be made due to death, illness, unemployment, or disability.
PPI claims are rejected for a number of reasons. There is an unusually high percentage of rejected PPI Claims. This may be due to the fact that many consumers do not fully understand what this insurance is or what it does. Because of nature of the PPI and the way that it is sold, customers would do well to get some professional advice prior to obtaining this kind of insurance, to ensure that they have complete understanding of the terms and conditions and to make sure that a PPI policy is something that they can, realistically, benefit from.
Mis sold PPI
There has been a great deal of controversy surrounding PPI Mis selling in recent years. Because PPI policies are generally sold at the time a borrower takes out a loan, these types of policies have often been abused by the seller. Misinformation, misleading claims, and out right deception have been employed by some lenders to get borrowers to buy Payment Protection Insurance that, in most cases, was not wanted, or needed. Some customers had no idea what they were purchasing, or why. Because of the rampant misuse of PPI, and to prevent PPI Misselling, it is a good idea to seek professional advice.
As stated above, in some cases a customer may have purchased PPI under false or misleading conditions. Under this kind of circumstance the customer can reclaim the PPI. Although this can be done without professional assistance, most often it is done with the help of a professional. In fact, it is recommended that profession advice is sought to reclaim not only the funds lost due to possible Protection Insurance mis selling but also the interest that was charged. If the loan has been paid in full then all funds would have to reclaimed, however if the loan is still payable then only previous payments plus interest paid can be reclaimed. Future cost and interest would have to be written off of the loan agreement.
PPI is a good thing to have but it may not be of benefit to everyone who applies. Because the cost of this insurance is relatively high, customers should make sure that PPI is the type of insurance that would be of benefit to them before agreeing to it. Depending on the lender, PPI can be anywhere from 16 to 25% of the debt. This added cost could put an added burden on an already grave situation, or it could help give peace of mind to the insured who is uncertain of his or her future. When deciding on reclaiming PPI it is important to consider not only the loan or credit that you are applying for but also future payment of that loan or credit and how it will impact you and your family.