PPI Explained
Payment Protection Insurance, also known as PPI, is sometimes referred to as credit protection insurance or loan repayment insurance. PPI is an insurance product designed to cover a currently outstanding debt. PPI becomes an additional debt or an overdraft and is sold primarily by banks and other credit providers. These lenders sell the insurance as an add-on product to loan and overdraft products. Its intent is to protect the borrower against circumstances that would prevent them from earning a wage that would allow them to pay the debt. Circumstances that are covered include accidents, sickness, death or loss of employment.
In its usual form, PPI covers minimum loan payments for a finite period – usually 12 months. After the 12 months have passed, it is the borrower’s responsibility to find other means by which to repay the debt. Twelve months is typically a long enough period to allow for the borrower to find another position and again begin earning an income, allowing him to take over the payments.
As with any insurance product, careful consideration should be given to determine if the product is right for you and your financial situation. Ensure that you understand what conditions must be met before PPI claims can be submitted and the length of time the benefits would be paid out.
Tags: insurance, payment insurance, PPI