Payment Protection Insurance - Worth the Extra Cash?

By Rachael A Miller

Payment Protection Insurance (PPI) is designed to allow the borrower to keep up their payments on loans and credit if they aren't able to pay the repayments themselves, usually due to illness or losing their job. PPI can create peace of mind for the borrower, however that comes at a price. PPI can cost up to twice as much of the interest of the loan. It has also been revealed that 25% of people who claim on this insurance are unsuccessful. Is PPI worth it?

PPI is making the financial sector £5.4 billion per year, which proves many borrowers opt in for insurance. Even so, it has been said that creditors are quite negligent when explaining their small print. PPI is designed to pay your credit payments if you are unable to pay them through no fault of your own, for example if you fall ill or are made redundant. However, some customers do not realise that if these illnesses are concerned with pre-existing medical conditions then they are not entitled to a claim. Also, illnesses such as stress and back pain, which don't seem as serious, may be declined. Your situation concerning employment is also an issue. If you are self-employed this automatically exempts you from qualifying for cover, as does if you work as a contractor whose income may fluctuate from month to month.

Even though there seems to be many downsides to taking out a PPI, such as the cost, and the likelihood of being unsuccessful when making a claim, it offers the customer a peace of mind which can be priceless. If you read the small print of your policy and your circumstances match those stated, a PPI could be a worthy investment. Most people aren't aware that if you are unhappy with your policy you can cancel it by giving your provider thirty days notice. People aren't always aware of the option to shop around for PPI. Just because you are taking out credit with a company doesn't mean you can only take out their insurance. You can shop around and go to independent insurers who may give you a better deal.

When shopping around for personal loans make sure you also shop around for PPI. With economic uncertainty, interest of loans are increasing, and so will your insurance. Compare loans and PPI online before applying.