As with any insurance you need to consider the worst case scenario. If your income was to dry up, would you be able to meet your borrowing commitments?
This will all depend on your financial circumstances
and the size of the debt. If you are married and have
a partner who works you may decide that PPI is not
needed because their salary would be enough to
cover your repayments. Alternatively,
you may have some money in savings that mean
you could continue meeting your repayment obligations.
However, if you are at all worried about how you
would cope financially if you lost your job, had
an accident or became ill, taking out PPI could
be well worth the peace of mind.
If you do decide this type of insurance is
worthwhile, check the small print: make sure you
know exactly what is covered and shop around, as
prices vary significantly.
Make sure you know exactly what is covered and shop around, as prices
vary significantly
Am I eligible?
In order to successfully make a PPI claim,
you must be in permanent employment when you take
it out. It is therefore useless for retired people,
housewives and students, and most PPI policies
will not cover you if you are self-employed and
become unable to work.
Other instances in which most lenders and insurers
will refuse claims include if you have to stop
work due to stress, a bad back or a pre-existing
condition that you failed to mention when taking
out the cover.
The small print for PPI policies often includes
further exclusions, so make sure you read the terms
and conditions carefully before signing up.
Do I have to buy it from my loan provider?
One of the reasons PPI gets such bad coverage
in the press is that in the past, some lenders
have implied that customers are required to
take out PPI when taking a loan or credit card.
This is not the case.
In fact, signing up for PPI linked to a cheap loan
can often significantly increase the cost of the loan
and the insurance: many loan providers add the cost
of the insurance to the amount you are borrowing which
means that in addition to paying interest on the loan,
you also pay interest on the PPI premium.
You do not have to sign up for PPI at the point of sale and you do not have to take the cover from the loan, credit card, mortgage or finance provider. In fact a standalone provider may well be able to offer you cheaper and more comprehensive cover.
Continue to page 3 to see if you want to cancel it >>
