Payment insurance: The good and bad points
- 19TH OCTOBER 2007
As with just about anything payment insurance has both its good and bad points, although with the recent attention it has got it might seem like the bad far outweigh the good, unless you understand the product. Problems started back in 2005 for the payment protection sector when an investigation revealed that there had been wide spread mis-selling of policies after the Office of Fair Trading received a super compliant from the Citizens Advice. Following this fines were given to several high street firms and the sector was referred to the Competition Commission who is conducting an inquiry into the sector which will end in February 2009.
The bad points of payment insurance is that it isn’t understood and the majority of consumers don’t realise what they are buying, how much it will cost, what the exclusions are in a policy and that they have the option of shopping around and buying the cover independently from a standalone provider.
Policies have exclusions such as if you are suffering from a pre-existing medical condition, are retired, self-employed or you are only working part time. These are only common ones and there are more and these are found in the small print of the policy and aren’t always made clear particularly if you take the cover alongside the loan. The cost of the cover can also vary greatly and the consumer sometimes isn’t aware of how much this will boost up what was a “cheap” loan.
One standalone payment insurance provider who is always campaigning for the rights of the consumer is Simon Burgess from standalone provider British Insurance. British Insurance only sells payment protection products so are able to give you their expertise on the products and the information you need to ensure that a policy would be suitable for your needs. While Simon welcomed the investigation and the changes that have already been made he says that more needs to be done to make the product more transparent for the consumer.
The good points to payment insurance are that providing you have read the small print and have made sure that a policy is suitable for your circumstances then it would begin provide a tax free lump sum between the 31st and 90th day of being out of work. A policy would give you the money so that you could continue to service your loan repayments without worry and added stress if you should find yourself out of work due to an accident, suffering a sickness or through unemployment. It would continue to payout for up to 12 months and with some providers for up to 24 months.
