Credit insurance also known as payment protection insurance or PPI is an insurance that helps the consumer to pay off his loan in case the borrower of the loan becomes ill or is disabled or faces circumstances that might prevent him from earning income to pay off the debt. At times there can be several situations like death of borrower or loss or job that might make it highly difficult to pay off the loan. So PPI helps the lender like bank or other institutes that provide credit to claim the loan amount from insurance company. Payment protection insurance is not the same as income protection insurance where the policyholder is benefitted when he become ill or disabled and is not able to work, here the policy holder after making the claim gets the payment until he has passed away or until he has recovered, here he gets regular payments in form of monthly or weekly payment that are not taxed. However PPI works on a different concept, it is not a payment plan it is more of repayment structure to benefit the lender who provided the loan to the borrower that is policyholder. PPI can cover loans like home mortgage borrowing, loan from finance companies as well consumer loans for example car loan. The policy is purchased by the borrower however it intends to benefit the lender in case of any uncertainty that makes it very difficult for the borrower to pay off his loan. These kinds of insurance are taken generally when the creditor extends his credit to his consumer.
The Facts about Payment Protection Insurance which People generally are not aware of
The payment protection insurance or PPI is ideally designed to benefit the lender but at times they are mis-sold by the credit provider and the third party brokers as well. To earn great commission, the creditor like banks could reap more benefit from the original loan amount and hence it became more of profit making insurance for the banks. The interest of the borrower was ignored and hence insurance were sold off to borrowers which have been less beneficial to them but beneficial to third party brokers and lenders like bank. Some companies selling these insurance even tried to mislead the consumer by not sharing the cost and nature of the insurance, the only thing they emphasized was on the protection part. At times the consumers were falsely informed that the insurance was a compulsion. Since the consumers were already helpless as they feared that the loan might be refused if they decline PPI they were left with no alternative but to purchase it. With the help of financial services authority and Financial Ombudsman Service, the mis-selling of such Insurance has been regulated and control to quite an extend.
To avoid falling victim to extremely high PPI price it is good to go with the right calculation of PPI. The PPI calculation is generally dependent on the lender. But by calculating your PPI yourself you would get the right idea of what is the right cost for the PPI required by you. By checking with free ppi calculator you can calculate your PPI. The freeppicalculator.co.uk not only throws some light on how the PPI works but it also has answers to frequently asked questions. The free ppi calculator is free and you can call them on the toll free number and speak to their advisors. The freeppicalculator.co.uk also provides few examples of people who successfully claimed their money back from these PPI providers. To avoid getting mislead and to avoid paying high amount for your PPI you should definitely check this website.
