There are other providers of short-term Income Protection and other products designed to protect you against loss of income. For impartial information about insurance, please visit www.moneyadviceservice.org.uk
Six reasons to consider this insurance
A guide to Income, Loan and Mortgage Payment Protection Insurance
Income, Loan and Mortgage payment protection insurance, also known as PPI, are an umbrella of products that offer short-term protection for workers who have lost their income due to circumstances out of their control. Specifically, it allows people out of work due to involuntary redundancy, accident, or illness to sustain themselves financially.
Many Brits rely on payment protection insurance products to meet debt requirements, expense needs, and mortgage obligations during temporary displacement from work. There are three basic types of payment protection insurance cover. They are income protection, mortgage protection, and loan protection. All three offer the same relative benefits, but there are some modest differences between the three cover types.
One of the similar aspects of the three types of payment protection insurance products is that they are all short-term in nature. All are designed to offer benefits that are paid out monthly, over 12 to 24 month timeframes, depending on the insurance plan. They all cover events that take place after initial 30 to 90 day time period following initiation of the payment protection. The basic covered events of accident, sickness, and involuntary redundancy are offered by each product type. Customers can elect to have protection for one, two or all of the events allowed. Each of the products is intended to provide short-term financial assistance for the insured and their family in a way that is not generally available from other sources.
Of the three payment protection insurance covers, income payment protection insurance is probably the simplest to understand. Its main purpose is a monthly tax free income payment to support monthly income deficiencies causes by a job loss. The amount of protection available through income payment protection insurance plans is usually 50 per cent of standard monthly income. Income payment protection is sometimes confused with income protection because of the similar names used to describe them. They are quite different, however. Income protection is available over the long-term, with some people eligible through retirement age. The benefits of payment protection in the form of income protection insurance are intentionally most advantageous in the short-term.
Mortgage payment protection insurance is very similar to income payment insurance but its purpose is to support monthly mortgage obligations of the insured. Many people temporarily out of work rely on the short-term assistance to keep up with monthly mortgage requirements. Coverage is typically available for up to 75 per cent of monthly income, or 1,500 pounds. The idea of the protection is that it pays for the monthly mortgage of the insured as well as mortgage-related costs such as insurance. Many banks and High Street lenders have commonly combined the mortgage protection insurance protection at the time the consumer takes out the borrowing. This has sometimes led to mis-selling tactics.
Mortgage Protection Insurance – Loan Protection Insurance – Income Protection Insurance – Income Protection Insurance – Quote and Apply
Loan payment protection insurance is the third of the payment protection insurance industry covers. While still very similar to the other two payment protection products, loan protection insurance is the broadest in terms of coverage opportunities and benefits. Loan protection is typically intended to cover up to 100 per cent of the insured's monthly debt obligations, with an additional 25 per cent of monthly income allowable for expense requirements. There is a 50 per cent of income or 1,500 pounds maximum, depending on which is lower. As with mortgage payment protection insurance, loan payment protection insurance products are also combined at times with loans.
As mentioned, the combining in payment protection products with loans in itself is not entirely unethical. Unfortunately for many borrowers, however, some High Street lenders have been notorious for their mis-selling practices. In combining insurance protection with loans, many have used high pressure selling tactics, or deception to line their pockets. Some lenders have suggested to borrowers that the income insurance was required as part of the loan. Others have deceptively built the insurance premiums into the loan payment plans in a way that hides their expensive costs. Some insurance sellers have even sold the protection to part time employees, retirees, or people with pre-existing conditions, all of whom are usually ineligible for benefits under these types of plans.
Large institutions have backed off a bit from these mis-selling tactics due to heightened consumer awareness and government involvement. Citizen's Advice and other leading consumer groups brought a super complaint to the Office of Fair Trading (OFT) in 2005 which prompted an investigation into the payment cover industry. The Financial Services Authority (FSA) got involved as well. As a result, many payment protection insurance sellers were fined or sanctioned by the FSA for their practices.
The attention has helped alleviate some of the questionable practices by banks and High Street lenders, and this means that the good news is that consumers are becoming more and educated than ever about the benefits of payment protection insurance as well as the cautions. Many consumers are turning to more reputable standalone insurance brokers such as the ethical Burgesses for their mortgage and loan insurance payment covers.
Independent insurance providers are not prone to combining insurance with loans or other types of products because most specialise in insurance products. This specialisation not only keeps them focused on customer service, but it also allows them to offer among the best payment protection insurance products from the best providers, and at the best premiums. A protection insurance plan from Burgesses, for example can have premiums at 40 to 80 per cent discounts off institutional products.
Consumers are definitely starting to recognise the need to be proactive with payment protection insurance cover. Surveys still show lots of misunderstandings about the industry, but an increase in the amount of people taking on protection. Only one in three homeowners currently have mortgage insurance protection, but about 60 per cent of new home owners are getting it. This increase is attributable to a few key factors. Many Brits have mistakenly relied on the State for short-term assistance. However, after the development of new policies in October of 1995, little to no State support is available for short-term unemployment. Even people that do receive assistance often wait several months before it arrives.
The expansion of independent payment protection insurance providers and public awareness of product benefits have also been helpful to the industry. The negative publicity has heightened understanding of the loan insurance and this has only helped to make the consumer more educated about the range of payment protection products available and the best places to buy them.
If you are looking for income protection in the form of one of the payment protection insurance plans available, then visit a standalone provider such as Burgesses. You will get a low cost way to have the peace of mind that your finances will not be in turmoil should you lose your income due to involuntary redundancy or prolonged illness.
