Payment protection insurance myths
- 3RD MAY 2007
The recent Financial Services Authority and Office of Fair Trading investigations into payment protection insurance (PPI) has been much publicized and, as a result, consumers are more curious about the product than ever before. However, many myths now surround payment protection insurance because consumers have not been sufficiently informed about its benefits and exclusions.
Myth 1 – A loan or credit card offer can be refused if the consumer refuses to take out payment protection insurance.
This is definitely not the case. Simon Burgess, MD of standalone payment protection insurance provider British Insurance, states “If you take out an unsecured personal loan, you are free to accept or decline the lender’s payment protection insurance. They cannot insist that you take out payment protection insurance as it is not compulsory. If they try to, remind them that this is in breach of FSA rules that require you to be treated fairly.” He adds that the loan quote should be recalculated to exclude the cost of payment protection insurance.
Myth 2 – Payment protection insurance suits everyone, regardless of status.
Simon Burgess highlights the fact that the terms and conditions of payment protection insurance mean that it is definitely not suitable for everyone: “If you are retired or work less than 16 hours a week you will never be able to successfully claim… because these circumstances breach the eligibility conditions for cover.
“Plus, for the self-employed, a payment protection insurance policy is probably not the answer. Claiming successfully would in effect mean that you’d have to shut down your company in order to show that you have suffered financial loss as a result of becoming unable to work”.
He adds that if you have a policy and have been mis-sold it because you fall into the above category you should therefore seek a refund.
If payment protection insurance is sold effectively then consumers should know the basics of the policy, which makes independent companies infinitely better to buy from. Independent payment protection provider British Insurance, for example, makes sure the customer is fully informed about the terms and conditions associated with payment protection insurance before a policy is put in place.
