An overview of Payment Protection Insurance

An overview of Payment Protection Insurance

Payment Protection Insurance, abbreviated as PPI, is a liability insurance to cover the debts in case the debtor becomes unfit to pay the loan due to accident, chronic illness or sudden unemployment. It also applies to failure of repayment owing to death of the debtor. Perhaps, PPI has its own limitations. PPI assures to repay the loan for a span of one year. At the end of the deadline, the defaulter has to assume responsibility to repay the loan irrespective of his/her circumstance.

PPI does not appreciate repeated claims. There are certain regulations that are followed very strictly. Additionally, it is necessary to know if PPI is really going to benefit the debtor. If the debtor is wealthy enough to pay back the loan all by himself/herself, no matter if he/she is unemployed or running short of money, then spending on PPI would merely be another expenditure rather than a saving. If the debtor is not sure of income flow, uncertain of employment or expects a sudden cease of income stream, he/she has to go for it. It is very important to go to the insurance company, collect details and verify them in order to buy insurance. An online research is even better. It will help the debtor to know the insurance that best suits him/her.

Sometimes PPI becomes a forced insurance. It comes along with a huge purchase. It is also forced on someone who buys loans. For companies that provide loans, PPI is very important. There are fine chances that the defaulter could face mishaps. This will turn out to be a hurdle for the loan companies to collect the loan back from the debtor. Same applies to banks that sophisticate people with loan facilities.

PPI in such cases is sold to the debtor along with the purchase or loan. Close to 70% of people in UK who borrowed loans and purchased goods have been provided PPI along with the goods. This simply means that PPI has been sold to the debtors without their knowledge. In most cases, the cost of this insurance is added along with the cost of the product.

Competition Commission has stepped in to rectify this issue. Competition Commission has announced that the insurance should be sold to the borrower only after one week after the purchase of the loan, good or credit card. Additionally, FSA has invited itself to this party and has put a significant amount of 2 billion dollars from PPI related companies at risk. FSA has given right to debtors to claim money in case the debtor has bought the insurance without realizing it. Perhaps, the claim will be approved only after a thorough investigation. Besides, not all defaulters can expect total amount. In most cases, majority of the amount is paid back. It is therefore necessary to go through the papers during loan or good purchase.

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