In these credit crunch times, we all need the reassurance that our loans, credit cards and mortgages are covered by insurance, should we be unable to work due to illness or unemployment. The insurance market is huge, and offers many options, but unfortunately, many of its products are not all that they seem.



Every time you sign up for a mortgage, secured loan, credit card or personal loan you will be offered insurance. This type of policy is called Payment Protection Insurance or PPI. The basic sell is that your payments will be made should you be unfortunate enough to fall ill and be unable to work, or if you should lose your job. Policies are designed to cover your payments for a year, and typically, payments start after a deferred period, ranging from 1, 3 or 6 months.

You will be encouraged by clever sales tactics to sign up as part of the original deal, by salespeople who are earning large commission payments. The premiums may also be added to your original repayment schedule – so you will also be paying interest on your insurance, adding possibly thousands of pounds over the term of your loan or credit card term.

PPI cover is not suitable if you are self-employed but may well still be offered. You should also look very carefully at the small print on PPI deals – if, for example, you have a chronic condition such as diabetes, you may well find your policy would not cover you in the event of you taking time off work for any related problems. Ask your salesperson about the exclusions,and make sure you fully understand before you sign up.

If your employer pays you in full if you are off sick, or if you would be due for a redundancy payment in the event of unemployment, then a PPI policy may not be the best choice for you. Similarly, if you have a partner or spouse and have 2 incomes, perhaps you could cover any payments, at least in the short term.

If, having considered all these points, you feel PPI is for you, then shop around on the internet or high street for the best policy for your needs.

The British Insurance Brokers Association (Biba) recommends that you speak to an independent broker or financial advisor before signing any PPI deal – compare what is available before you take out any deal that is being offered with your loan or credit card deal.

One of the leading brokers in the income protection and PPI industry is British Insurance. Their advice again, is shop around carefully. They say you could save as much as 90 per cent on premiums and still get the right cover to suit your needs. Sales techniques used to sell you policies are designed specifically to almost scare you into signing, and often, the person who benefits most is the salesperson! You realy must make sure that you are the one to benefit.

Always check your advisor is authorised by the FSA.