Payment Protection Insurance: PPI in-depth

Most people take out a loan with a set plan of repayment, but what if something goes wrong

11:06 12 November 2012

Many people take out loans. Whether it be to help you afford a new car or because you’re planning on refurnishing your house. Sometimes there is no alternative other than taking out a loan. So after you’ve had the important meeting with your bank or other loan provider, you’re probably in the know as to when and how your repayments will work.

 

But what happens when the plan devised to help you pay off your loan is derailed? What happens if, for some reason, you’re suddenly prevented from meeting your payments?

 

This is when Payment Protection Insurance (PPI) comes in.

 

Payment Protection insurance

 

•    PPI is devised for people who find it difficult to cover outstanding debts

 

•    PPI can be taken out when a person takes some sort of loan, such as an overdraft

 

•    A PPI claim can be filed by an individual when they are struggling to meet their loan repayments

 

When can PPI be used?

 

PPI can be used at times when a person is unable to pay a loan back. This can relate to an individual suffering an accident, becoming sick or with regards to death, all of which are grounds for PPI to step in.

 

How does PPI work?

 

PPI works by covering for money which was borrowed if a borrower cannot make their usual payment to a lender.

 

PPI works by a claim – which is made by a policy holder – prompting an insurance company to pay either whole or part of a sum of money that has been loaned to a person.

 

There are different types of Payment Protection Insurance policies and depending on which one a person has applied for determines the amount a company can provide.