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According to the title of a recently published book by Eric Bischoff (who worked
for media mogul Ted Turner), “controversy creates cash”. There are examples of
it throughout society – the latest Big Brother winner Shilpa Shetty has had her
profile raised thanks to the way she handled alleged racist abuse on the show,
while the recently deceased Anna Nicole Smith became a household name worldwide
when she married an 89-year-old billionaire. But it’s not just the most
high-profile controversies that have financial rewards – because if the Office
of Fair Trading’s (OFT) investigations are an indication, then a controversial
insurance product appears to be cashing in at our expense.
The
product under scrutiny is ‘payment protection
insurance’ (also known as ‘income protection’ or ‘ASU cover’).
Payment protection insurance (or PPI for short) is designed to pay out if the
borrower cannot make repayments on a loan, credit card or mortgage due to an
accident, sickness or unemployment. It all sounds good in theory and there’s no
denying the peace of mind that PPI can offer – but unfortunately many policies
can be costly and have been mis-sold to those for whom they have little value
(such as the self-employed). Indeed the OFT declared last year that PPI was
‘failing customers’ and recently referred the matter to the Competition
Commission for a full-blown investigation.
The
major issue with PPI is not that it is a ‘bad’ product but that people don’t
shop around and generally accept it as an expensive add-on to a loan or credit
card, which can be five times more expensive than taking out a
stand-alone policy. The key to avoid being ripped-off is to shop around using a
PPI comparison tool such as ours and
consider stand-alone providers which regularly offer consumers better deals.
These stand-alone options are being overlooked simply because consumers are just
accepting what they’re offered from the big banks.
Many of the stand-alone policies offer much more flexibility. For example,
PayProtect
has a range of options, such
as a 90day excess period for a reduced premium (so if someone gets three months
full sick pay from work they can receive payouts from the end of month three)
right to a zero day excess period which will cover them from the very minute
they are taken ill or made redundant.
The
Competition Commission can do one of three things with its investigation –
absolve the companies and take no action; ask for reforms; or impose its own
rules to ensure fair practise. However, consumers should bear in mind that this
issue dates back to September 2005 and so action might still be some way off.
In
the meantime you should not wait around to get yourself a better deal so there’s
no controversy over YOUR cash.
LINKS:
Payprotect insurance
Compare
more than 40 payment protection insurance policies
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