Payment Protection Insurance, commonly known as PPI, is a type of insurance designed to cover an outstanding debt in an event of unemployment, illness, unexpected accident, death or an involuntary redundancy. The service is commonly offered by various banks, which comes as an accessory with a loan or overdraft product. It serves as a backup in a situation where it becomes almost impossible for a person to repay the debt. It is also called ASU (accident, sickness and unemployment) insurance, Payment Cover or Account Cover.
PPI has three basic types. These are Income Payment Protection Insurance, Mortgage Payment Protection Insurance and Loan Payment Protection Insurance. The basic purpose of all the three types is the same, i.e., provide assistance in debt payment in a situation when it becomes unfeasible to do so.
Income PPI is a supplement of the monthly income, if the insurance holder loses the job due to sickness, accident, or if fired without any fault. Although it may not be equal to the actual salary, it is enough to support the holder till he gets a new job or some help from elsewhere.
As the name shows, mortgage PPI provides assistance in paying the required amount of monthly mortgage. For most people, this is the most important type of the three payment protection insurances, as failing to pay the monthly mortgage payment may result in dispossession of the property. This assistance imbeds a sense of security in the minds of holders regarding their homes and other property.
Loan PPI provides assistance in payment of a monthly debt, under the circumstances that the holder cannot possibly pay due to the above mentioned reasons. As most of the shoppers out there rely on credit card debts these days, they need to have a backup plan, in order to pay the debt of these credit cards in bad times. This insurance is mostly offered by banks and other loan lenders as an add-on.
There are various methods to acquire PPI. Internet is accessible to everyone these days, so the easiest place to search for it is on the World Wide Web. A lot of service brokers advertise this service on their websites and various blogs, so search for it. But, be sure that it is legitimate before applying, as it is a matter of money. You can compare various providers, including brokers and other banks, offering this service, and then choose the one that suits you the best. Remember to check the conditions that they have on the time of insurance claiming.
When applying for PPI, one must also keep in mind the price. The interest rates on loans and mortgages do not usually include the cost of PPI policy. It is the responsibility of the salesperson to inform you about the cost of insurance, apart from the loan, and whether buying the policy is compulsory or not.
Like all the other insurances and loans, there is a list of certain exceptional cases, where it cannot be applied. These include people between ages of 18 and 65, working less than 16 hours a week, contractual employees and those who are aware that they may be unemployed in the near future.