Summary: This article aims to explain what payment protection insurance is, and how to find out if it has been applied to past credit.
Over the last few years, payment protection insurance (PPI) has featured regularly in the press with accusations of mis-selling by the banks. This has led to a tidal wave of claims by the general public, attempting to reclaim their money. But what actually is PPI?
PPI is an insurance designed to protect an individual’s repayments on credit they may have taken out. It can be applied to any form of credit, such as a mortgage, bank loan and/or credit card, and it was usually offered at the time the credit was authorised.
What does PPI insure against?
As mentioned above, PPI was designed to protect the minimum monthly repayments for credit, usually for a specified period of time, should the individual become ill, have an accident or if they are made redundant. It may also protect the repayments should the individual be unable to meet the minimum repayments for other reasons, which would be specified in the policy document.
How do I know if I have PPI?
When credit is first obtained, the creditor should ask the individual if they require it, and ensure that it is indeed suitable. However, there have been cases where PPI has been applied without the individual’s full consent. The easiest way to check if PPI has been applied to credit is to check the original paperwork provided, such as the loan agreement. It may also appear on the repayment statement. If this is unavailable, the individual should contact their credit provider and ask if it was applied to the credit. If it is still unclear, then the creditor should provide the details of the underwriter for the PPI and they can be contacted directly.
In some instances, PPI payments may be reclaimed if the insurance was mis-sold. Depending on the original loan or credit obtained, this could equate to quite a significant amount and could be of particular benefit to those currently in financial difficulty as it could help repay debt or go towards an Individual Voluntary Arrangement (IVA). For further advice, an individual should speak to an independent money advisor, or to one of the free organisations such as the citizens advice bureau (CAB).