Types of PPIs
There are 3 categories of Payment Protection Insurance cover:-
Accident, Sickness & Unemployment (ASU) policies or Income Protection
These are usually “stand alone” policies taken out separately and used to protect
your debt repayments. The policy pays a percentage of your earnings if you’re unable
to work due to illness, injury or redundancy.
Single Premium Policies
These tend to be the policies which are often mis-sold and you pay the premium for
the PPI as a lump sum. This is often hidden by lenders who will add the full cost
of the policy onto the loan which then accrues interest for the full term of the
loan – greatly inflating the cost of the policy.
Most Single Premium Policies are only offered for a maximum of 5 years so if your
loan is being repaid over 7 years you will not have any insurance cover for the
remaining 2 years but may still be charged the interest for the cover.
Monthly Paid Premium Policies
This insurance is mostly sold alongside credit cards to cover any outstanding balances
if you’re unable to pay and the premiums are paid monthly.
Often you may not know you have this insurance – especially if you don’t notice
the opt out details on the application form