Payment Protection Insurance. News from the Post Office

Author: Dot Piper

There's something new down at the Post Office. The payment

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protection insurance (PPI) market has received some really bad press in the past year or so. The Post Office has obviously seen an opening for them and they have entered the market, with a promise to offer a fair and reasonable deal.

Payment protection insurance is offered to people taking out a mortgage, personal loan or credit via credit cards, etc., It is intended to cover the periodic (normally monthly) payments should you find yourself out of work, sick or injured. Normally there is a waiting period of 28 days before you can claim and payments are then made for varying periods, according to your policy, usually up to 12 months.

The reasons for the bad publicity with which these products have been ( cheap life insurance ) associated with are related to mis-selling and extremely high interest rates. PPI's have been sold indiscriminately, even to those who cannot benefit fully from the cover they offer. As an example, there is no benefit whatsoever in offering cover for redundancy to some-one who is self-employed or engaged in short term freelance work. It may be that you are already covered for loss of income by another policy already in force, by an income protection policy or similar.

As far as interest rates are concerned, these can triple when ( term assurance ) PPI is added. A loan of £10,000 over a period of five years can add up to a massive £16,114.40 if PPI is included. Without PPI the total would have been £11,650. The APR is increased from 6.2% to 22.7%. These figures are from one of the big banks.

There are also limitations on the injuries for which some of the ( life insurance policies ) policies will pay out. Not all include back problems or depression. Not all professions can be covered, such as oil-rig workers, actors, taxi-drivers and some people engaged in professional sports.

When taking out a loan or mortgage there is a tendency to use the lender's "optional" insurance plan to cover payments should things go wrong. However, this IS an option and there is no reason why you should not find a much more suitable, both for cover and price, stand-alone policy.

The Post Office PPI is called a Lifestyle Protection policy. It is a standalone product, which means it can be used in conjunction with any loan or mortgage. The repayment per month of incapacity will be up to £2,500, although there is a limit of 60% of gross monthly income, which makes it less appealing for higher earners. Payment will start from the first day of claim - an improvement on the normal 28 days or so. A small element of lifer cover is included and the cover includes stress and back injuries, depending on the usual medical evidence.

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