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What is PPI Loan Insurance

How to get it for less

Payment Protection Insurance (PPI) in the majority of cases is extremely expensive and often forced on people who take out loans and credit cards.

In fact, it's probably the biggest financial rip-off of the last decade, and as the Citizens Advice Bureau remarks -

"it is more about providing another source of mega profits for the financial industry than about protecting consumers"

However, the theory behind PPI is sound, it's the inflated price that's been the problem. This article therefore looks at how to get a cheaper PPI quote.

What is Payment Protection Insurance (PPI)
It is an insurance policy that covers your monthly loan/credit card/mortgage payments should you become unable to work because of illness or injury. There are different 3 types of cover -
  • Loan or credit card protection insurance
  • Mortgage payment protection insurance (MPPI), and
  • Income payment protection - this pays a cash sum every month for you to use as you wish

However some jobs are excluded from PPI cover, the main one being the self-employed. It's important therefore to always read the small print and ask the company selling the policy if you qualify.

Buy a standalone PPI policy if you want the best deal
One of the most important facts to realise about PPI is it's a standalone insurance policy. This means that all PPI policies are roughly the same so it pays to buy the cheapest. For example -
  • The ABC banks quotes £59 a month for £1000 a month in unemployment cover (should you lose your job the policy will pay out £1,000 a month for up to 12 months)
  • An independent insurance broker offers the same policy for £39

There is little if any difference between the 2 policies, apart from an extra £240 over the year, so obviously you would buy the policy from the independent broker. However, watch out because the banks collectively have been fined millions by the financial regulator, the FSA, for telling their clients that -

  • PPI was compulsory when taking out a loan (it's not and never has been), and
  • They could only buy the insurance from that bank (again 100% wrong)
Go flexible - It's important
When buying any financial product always try to go for the ones that offer the most flexibility as you never know how your financial circumstances might change. Many of the expensive PPI policies the banks sell make it difficult to cancel and also will tie you up in a long contract. You might therefore end up paying for insurance you no longer need.

But most standalone PPI policy are on a short term monthly contract, ie cover is as long as you continue making the monthly payments.

PPI flexibility is an important point and it perfectly highlights secret number 3 - Buy both simple and flexible - which is one of this site's 10 Secrets to Good Personal Finance.

Where to buy good value PPI
British Insurance looks to offer the most competitive standalone PPI policies on the market. And what I like about this firm is they've long been critics of the majority of PPI sellers, arguing correctly that they've been taking advantage of the public by a combination of aggressive selling tactics alongside expensive prices.
  • Go to the British Insurance website for more information and to get an indication of a how much a PPI policy will cost
  • I've just checked out their quote feature out and a good point is that you are not required to enter any personal information
Summary
PPI is a good idea but it has been ruined by the greedy banks overcharging their customers.

However, some people do need the security that it offers so shop around to find a far cheaper standalone policy. In our experience nobody can beat the prices and overall flexibility offered by British Insurance.


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