The Post Office has launched payment protection insurance.
Lifestyle Protection is designed to be more flexible and fairer than standard PPI products. Alan Cook, managing director at the Post Office, says: "There are widespread concerns that people taking out PPI are unfairly treated. We want to change that."
Lifestyle Protection can insure monthly credit and loan repayments of between £100 and £2,500, up to a maximum of 60% of gross monthly salary. Payment is only up to 12 months
While a low premium is welcomed, competitors have voiced concerns.
Simon Burgess, Managing Director at British Insurance expresses his concerns:
" Because the Post Office offers cover irrespective of profession there is a possibility that they will see a very high incidence of claims, especially by offering cover for conditions such as stress and backache. Physically demanding professions, whether it be building, labouring or nursing, where backache can be a real problem, will be delighted that such a no hassle policy now exists. I have very grave concerns because the policy contains within the small print a 30-day termination clause. This means that cover can be cancelled with only 30 days notice and consumers will be completely abandoned as was the case with an identical scheme for the British Insurance Brokers Association (BIBA) where thousands of policyholders were abandoned when cover was cancelled by the insurer due to poor underwriting results."
The Post Office policy is available to a wide range of customers and does not have to be tied to a particular loan or mortgage, making it fully portable. There are other standalone income protection policies available.
Loan provider products can be very expensive. When comparing products it is important to check if the bank policy covers the full period of the loan. The Post Office policy limits cover to just 12 months. And loan policies usually pay off the outstanding loan in the event of the death of the insured, whereas the Post Office limits death benefit to just 12 months’ benefits.
There are other pitfalls to watch out for with the Post Office policy. The major causes of sickness absence from work are backache and stress-related complaints. Although the Post Office policy covers these conditions, it only pays out conditions lasting more than thirty days once they are diagnosed by a consultant in the relevant field. In today’s over-burdened NHS getting to see a consultant for a bad back could take months, during which time the customer will not be receiving any benefit.
The product is being pitched as ‘lifestyle’ protection rather than just loan and credit card cover, so higher earners will need to consider carefully whether £2,500 would cover all the financial commitments they need it to, while lower earners should focus on the impact of the 60% income cap.
Overall this appears to be a good policy, but buyers need to be clear about what income protection cover they are buying, as there are better deals out there for those prepared to shop around.
If you want an insurance policy purely for loan and credit card repayments, it is generally cheaper to get stand-alone loan proection cover than accepting the providers’ own cover.
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