When you are in the process of getting a loan, the agent may try to sell you payment protection insurance. In fact, in most cases when your loan or mortgage loan is being processed the agent will try to sell you payment protection insurance.
What PPI is. Insurance in a case that you default on repayment of the loan due to illness, loss of job, etc the PPI will cover the loan repayments so that you don’t default on your loan repayments. The PPI premium will usually amount to 20 to 30 percent of the amount that you are borrowing. This premium may be payable as a single premium or in monthly installments. It’s good to get a PPI cover as no one can predict their future circumstances.
However, before you get a PPI, make sure that you are not browbeaten into taking it. Also, make certain that you know all that is covered in PPI. A large number of PPI claims are rejected due to various reasons. The main reason is that the client did not read the exclusions in the PPI policy. Remember a loan officer or mortgage agent will only try to sell you PPI after your loan has been approved.
They are paid commissions by the insurance companies to sell PPI to loan applicants. They make it appear as a favor to the client and will not clearly state the rules. Most PPI only cover the first five years of a loan. If the loan installments stretch more than five years, like in the case of mortgages, you won’t be having any PPI. So, before signing a PPI, get the agent to explain to you why you need it.
One must also know what will be the terms and conditions. Its like taking a comprehensive insurance on a car and finding out that claims for less than twenty pounds are not covered in the insurance. Similarly, there are terms to a PPI, so you must find out what the terms are. In addition, if you pay the PPI premium in installments, you may be charged an interest on it.
You must know what these charges are. Do not ever blindly sign a PPI in your eagerness to avail the mortgage or loan. You do not want to be hit by surprises when you put in a PPI claim. If you do not understand the jargon of the PPI policy, then get someone who does to go over it and explain it to you. Do not depend on the seller for this information as they may cover some gray areas.
If you are well insured, have job security, and you don’t think there are any chances of you defaulting on loan repayments, then don’t take PPI. Remember PPI does not form an integral part of a loan it is optional. So it is up to you to decide whether you need it or not.
If you do need it, then vet it properly before taking it. You can also bargain on the premium that you will need to pay. Don’t get forced into signing for something that’s optional, as the agent is commonly does so to make his or her commission.