PPI is a dirty word in the insurance industry. It’s no secret some banks miss-sold thousands of policies and the whole saga has meant the products are now so misunderstood thousands of consumers are missing out on vital protection which could give them the safety net they need following an accident, sickness or redundancy. Ross Hebden, Head of Income and Mortgage Protection at insurance broker Family Insurance Services dispels the myths for you…
1. What is PPI?
Payment Protection Insurance (PPI) covers financial commitments (mortgage/rent payments, bills or loans) in the event of sickness, an accident or redundancy.
2. It is an unnecessary product.
Following the fallout of the PPI scandal, protection insurance advisers have been left with the responsibility of changing clients’ mentality on the above statement. Although the PPI scandal highlighted the pitfalls in how banks and lenders were advising or not advising their customers; the fact still remains, that provided the PPI is advised properly, it continues to be an incredibly valuable and relevant protection product.
3. PPI is complicated
This is one of the biggest myths of all. Within the policy wording, there are clauses such as ‘being either eligible for jobseekers allowance or claiming jobseekers allowance to make a claim for unemployment cover’, however; when advised properly, you should feel comfortable with what is needed to make a claim. Our advisers at Family Insurance Services, go through comprehensive training in order to make your life easier when deciding upon a policy.
4. They do not actually pay out any benefit
As with any insurance policy, claims are paid on 100% of valid claims. This means it is imperative that your adviser ensures you are aware of the key criteria to claim on a policy. The responsibility also lies with the client to fully understand the policy they have taken out and discuss with their adviser any misunderstandings
5. It’s a waste of money
‘I can just save the premium’ is a common objection that we receive from customers and in austere times I can understand these clients’ point of view. However, a quick equation shows a different story. If a client’s premium was £30 per month allowing for £1000 benefit each month for 12 months, it would take that client 33 years and 3 months to save the £12,000 they could claim on the policy.
6. There is no demand for these products any more
We are dealing with hundreds of clients a day wanting to protect their lifestyle and the protection market should be doing more to ensure awareness of this product is increased. The number of repossessions that occurred in the recession – and those which continue to take place could be dramatically reduced if more homeowners had this cover in place.
7. You have to have the product for a year before you can claim
With the majority of unemployment policies there is a clause which states if a client is made redundant OR made aware of redundancies within a certain amount of days from the start of the policy, normally 60,90,120 etc., then they would not be able to claim on the policy. This is to protect the insurance company but one of our trained advisers will happily guide you through this exclusion. Is the number of days changeable according to the level of premium or the individual insurer?
8. They are a way of cashing in on the vulnerable/those at risk of redundancy
Insurance companies put safeguards in place to actually discourage clients from taking a policy when they are at risk of redundancy. We recommend you take a policy when you are in a state of confidence with your job as you will need to complete the qualification period before any claims can be paid against redundancy
9. They are a product created by banks to make banks more money
We are all aware of the many banks which placed protection on the loans and mortgages lent to their clients without the necessary permissions but I speak to a lot of clients who have actually claimed on these policies and still received compensation for miss-selling. The issue has been increased by the banks submission to pay back all PPI claims regardless of whether the policy was miss-sold due to the perceived cost of administering all the predicted claims being greater than the cost of simply reimbursing the money. It was the tactic of issuing mortgage holders with these policies automatically and charging them for the policy which made the banks money not the policies themselves.
10. You can only have it if you have a loan
A complete myth. There are a range of products covering whatever financial commitment(s) you may have, be it a loan, mortgage, rent, income or bills. These days we tend to look at this insurance as protecting your lifestyle as most of us seem to have several bills which need protecting so as to keep us in the lifestyle to which we have become accustomed. Our team of advisors at Family Insurance Services can help you assess which of these commitments are most important to you and can subsequently ensure you choose the right product for your requirements.