It sounds like a good idea – payment loan protection or PPI. The idea is that if you get sick or lose your job, your car note or mortgage payments continue to be made on time till you can get on your feet again. PPI is generally offered to folks buying a car, taking out a mortgage loan or incurring some other sort of substantial debt. You may have heard a bit about it in the news of late. In the United States and Britain, a disturbing number of over-enthusiastic loan officers have pressured their customers to purchase payment protection insurance they either did not need or could not collect on if they did find themselves in a tight situation.Payment protection insurance is designed to cover your loan or debt repayments should you find yourself unable to work due to accident, illness or unemployment. The trouble is that these policies often vary widely as to what they cover and, more importantly, what they do not cover.
Payment protection insurance has come under scrutiny most recently because of problems with how PPI is sold and marketed to consumers and due to the high rejection rate for claims under these types of policies. PPI policies have higher rejection rates than almost any other type of insurance on the market.
PPI claims are typically rejected over some previously unsuspected exclusion clause in the small print of the policy. A substantial number of consumer complaints, however, charge that PPIs were “mis-sold” by insurance agents and loan officers. Many consumers did not even realize they were taking out a payment protection policy when they signed their loan papers. Other complaints allege that PPI policies were not accurately described to consumers.
A third type of complaint centers around disputes over failure to properly refund premiums, when the policyholder paid off the protected loan early. Many times the PPI policy is prepaid in a lump sum at the beginning of the loan. Insurers may include a clause in such policies that penalizes early loan repayment, returning premiums for just a fraction of the period following cancellation.
Complaints like these occur because such insurance is often underwritten during the hectic sales process, when customers may be more easily goaded into buying extra insurance. Customers may fail to give careful consideration as to whether PPI is the right insurance vehicle for their circumstances. Customers seldom obtain legal advice when they purchase such loan payment insurance and may later find the policy offers little real protection.
Regulators have in the past caught lenders offering lower interest rates on loans to attract borrowers and then charging the customer higher payment protection insurance rates and other fees to make up for the discount. If you think you have been mis-sold a PPI by an over-enthusiastic car salesman, loan officer or insurance agent or if your claim has been rejected when you thought you had coverage, here are some steps you can take:
- Locate your policy.
- Read the fine print.
- Hire a financial claims manager.
