It’s a shocking fact, but payment protection insurance (PPI) continues to be mis-sold despite acres of bad publicity about this product in recent years.
PPI is a voluntary insurance which pays off credit cards, personal loans and mortgages if you are unable to work because of accident, sickness or unemployment. But it typically only covers you for one or two years and is normally only suitable for people who are employed.
The self employed, unemployed and contract workers are not usually eligible to make a claim but thousands of people have bought these policies without realising this.
In addition, a Which? survey recently found that 1.3m people had bought PPI in the mistaken belief that it was compulsory if they wanted to take out a personal loan, credit card or mortgage.
Which? estimates that £970m is being spent on PPI each year, much of it bought by default because some providers automatically include the cover in quotations.
In June this year, the Competition Commission calculated that customers were being overcharged because they are unable to shop around at the point of sale. It also found that PPI is so profitable (generating £1.5bn in excess profit) that it has been subsidising cheap personal loans.
Numerous retailers and banks, such as Land of Leather and HFC have been fined for mis-selling PPI, yet the bad publicity has not prevented people from continuing to buy inappropriate cover.
But Defaqto head of Insight, Brian Brown, warns policyholders not to cancel existing cover if you have appropriate cover in place. “Providing you definitely want the cover and have the right policy for your needs and circumstances, at a time of rising unemployment, now is just the time when you might have need of it.”
If you want long term insurance to protect your income if you are unable to work because of illness, you may wish to consider income payment protection insurance, which is more expensive but can provide cover up till retirement.
For more on income payment protection insurance read our guide
http://www.defaqto.com/consumer/insurance/life/income-protection.aspx
For more on payment protection insurance (PPI):
http://www.defaqto.com/consumer/insurance/life/income-protection.aspx
Comments
Trackbacks