Introduction of Payment Protection Insurance
Introduction of Payment Protection Insurance
Payment Protection Insurance, also known as PPI, Credit Protection Insurance, Loan Repayment Insurance, is a type of insurance product which is designed to cover a debt that is currently outstanding. People should not get confused with Income Protection or Credit Card Cover considering it as payment protection insurance. This debt is typically in the form of a loan or an overdraft, and is most widely provided by banks and other credit providers as an add-on to the loan or overdraft product. While dealing with payment protection insurance, you will come to know that certain providers also include carer cover.
If the appropriate criteria are met, then the payment protection insurance covers minimum repayments against the loan or overdraft for a finite period most probably 12 months. After this cover, a person should start searching other means to repay the debt, though the period covered by insurance is typically long enough for most people to start working again and therefore start earning a salary with which to service their debt. Be careful that payment protection insurance (PPI) is quite different from other types of insurance like home insurance, in that it can be quite difficult to determine if it is right for a person or not. Also careful assessment needed to be done in those cases like what will happen if a person became unemployed as payments in lieu of notice (for example) may render a claim ineligible despite the insured person being genuinely unemployed. In this case, the approach taken by PPI insurers is consistent with that taken by the Benefits Agency in respect of unemployment benefits.
People should know that Payment protection insurance on credit cards is calculated differently, as initially there is no sum outstanding, and also its unknown if the customer will ever use their card facility. However, in those cases that the credit facility is used, and the balance is not paid in that month, a customer will be charged typically 1% of their card balance on a monthly basis as the premium for the insurance.
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