Individual Voluntary Arrangement (IVA)

What you need to know about Personal Payment Insurance

Each and every time you apply for a financial loan whether it is a credit card, mortgage or a personal loan the provider will no doubt offer you a policy to protect your payments called a Personal Payment Insurance

For those of you who have taken out a PPI will have noticed that the cost of this insurance is quite high.  In fact, research in to these insurance policy types has unveiled that a high percentage of the total income on PPI is apportioned back into commissions.

Are you really protected?

The whole idea of taking out any one of these policies is to protect yourself when a situation can become worse, for example you could be unfortunately be made redundant, your health takes an unexpected turn for the worse or you could even  have an accident that stops you from working.

If any of the above should occur then you would expect that you could call your policy provider and explain the situation and let them take care of everything else.  The reality is that many people have realised only too late that their policy does not fully cover them for their situation due to a technical clause they did not read initially at the time of signing.

According to industry research the number of people who have taken out a PPI and actually make a claim is less than 5 per cent (As at QTR1 2007) and even more disturbing was that around 25 per cent of these are then rejected.

Realise the true cost!

It has been mentioned before but it is seriously important to realise the true cost of PPI depending on where you go for a PPI, whether it is from an independent or the actual provider of the loan.  There have been known cases where the cost of PPI has nearly doubled the initial loan amount.  Some providers will charge a monthly fee to protect your loan and other will add the total cost onto the actual loan amount which results in the PPI costing far too much.

Your circumstance and the affordability

Depending on how much you borrow you may be forced to consider PPI, make an assessment based on what the policy actually covers you for.  Ensure you read the small print in detail.

Choosing a provider

Usually the loan provider will be the first to offer some form of PPI insurance.  Unless you know the market well, do not accept or commit to anything.  Contact independent companies and ensure you get like for like quotations in order for you to make accurate comparisons.

A little tip

Try and manage the amount of borrowings you have and hopefully you will not need to consider a PPI. 

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