Now may not seem to be the best time to go out and invest in yet another insurance policy.
But in times of economic turbulence it is unwise to chance not being protected against potential risks that are directly linked to your financial security. Although releasing money may help in the short-run, cancelling or ignoring the benefits of particular insurance policies may gravely affect your family in the long run.
James Harrison of Insurancewide advises consumers to think carefully about protecting their income. "With people in the UK losing their jobs at the fastest rates since 1991,payment protection insurance should be on your list of top priorities when considering the financial security of you and your family. In addition to the number of unemployed rising to its highest level since 1997, the cost of living also continues to go up."
What is payment protection insurance (PPI)?
PPI is a type of insurance that provides an income to maintain loan and debt repayments as well as general monthly bills and living expenses in the event of being made redundant. This type of cover is applicable when a person is no longer able to earn an income due to involuntary unemployment, sickness or an accident. PPI is available in a variety of forms as well as being sold under a multitude of names including:
- Accident Sickness and Unemployment Insurance (ASU)
- Premium Protection Insurance
- Income Protection Insurance
- Mortgage Payment Protection
- Loan Protection Insurance
- Credit Card Repayment Protection (CRRP)
Why PPI is important now?
- Utility bills, food prices, rental payments and mortgages are consistently and rapidly rising
- Almost 20,000 properties were re-possessed in the first half of the year due to homeowners failing to meet their mortgage payments
- The number of properties to be re-possessed is predicted to rise to 45,000 by the end of the year
- At present there are already 170,000 borrowers behind on their payments
- Only 1 in 3 adults in the UK has insurance that will provide them with an income if they are made redundant
- The number of people claiming jobseekers’ allowance has risen with an increase of 36,500, making it 980,900
How can PPI help?
People losing their jobs are finding it increasingly difficult to maintain their mortgage and loan payments as well other general payments needed to look after themselves and their families. However, with the right PPI policy you can protect yourself against these difficulties in the event that you become part of the growing number of unemployed Brits. PPI, depending on which policy scheme you choose, provides you with an income to pay for you mortgage, loans, credit card payments, utility bills and day-to-day living. Some policies will put money straight into your account whilst others will pay your owed payments directly themselves.
- Check to see whether you are entitled to a redundancy package from your employer
- If you have a redundancy package, check your terms and establish whether or not you could rely on the compensation to survive if you were to lose your job
- If your contract does not stipulate a sum you may only be entitled to statutory redundancy that consists of a minimum payment from your employer calculated by the government
- Remember that if your employer goes bust, regardless of your contract, you are only guaranteed the statutory minimum
- If you have insurance with PPI bundled into the policy, check what your guarantees are. Usually, PPI that is included as an extra in another policy is very unspecific and should therefore not be relied on
- Do not purchase your PPI policy from banks and building societies - they have been known to miss-sell these policies as well as charge exceedingly over-priced premiums
- Buy PPI now when you do not need it, before you find yourself without a job
Income protection insurance: News update: December 2008