What is payment protection insurance?

 

Payment protection insurance (PPI), or mortgage protection insurance, is a type of insurance policy designed to cover your mortgage repayment in situations when you suffer a sudden loss of income.

PPI is sold to give you a better chance of keeping your home if you suddenly lose your job or become too sick to work.

Mortgage protection insurance

Mortgage protection insurance is offered by mortgage providers to cover situations where you may find yourself unable to make a repayment.

Mortgage protection insurance is not commonly compulsory, although increasingly lenders are making it a requirement as they look to protect their investments in the current economic downturn.

Mortgage protection insurance is offered to:

  • Anyone looking to take a mortgage loan
  • Those who already have a mortgage but do not have policy cover

If you have limited savings, or are stretched by the amount of your mortgage payment then you should consider taking out a mortgage protection policy even more.

Why is it important?

PPI essentially covers situations where an unforeseen event creates a serious impact on your ability to make repayments, such as:

  • Losing your job
  • Unforeseen sickness

The only common situation not covered by such insurance is pregnancy, which is not covered unless there are complications. Many policies also discount back injuries and stress-related absences.

Mortgage protection insurance is useful because it can cover both interest and repayments. A good policy will pay out within one month of losing your job, and typically will continue to pay out for between 12 and 24 months. This is considered a long-enough period for you to be able to find a new source of income, recover from your sickness, or make alternative arrangements for your future.

What is the payment protection insurance (PPI) scandal?

In recent years there has been considerable controversy over the mis-selling of payment protection insurance by banks and other financial institutions. In recent months most of the major high street banks have announced huge compensation funds to cover claims for mis-sold mortgage protection insurance.

Banks would typically overstate the risk of needing the cover, would lie to encourage customers to take the cover out, or would falsely state the need for the cover, when in fact the client was already protected by other means.

If you have been paying payment protection insurance of any kind, including mortgage protection insurance, then you may be able to receive compensation for mis-selling. You should take legal advice from a specialist solicitor dealing with these claims to understand if you have a case and the level of compensation that may be available if you are successful.

Do you have a legal problem involving PPI or mortgage protection insurance? Contact Law can put you in touch with an expert financial advisor to deal with your case efficiently and cost-effectively. Please call us on 0800 1777 162 or complete the web-form above.

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