Lenders are still taking the PPI out of 2 million loans

As many as two million loan Payment Protection Insurance policies have been sold to people who may never be able to make a claim, according to new research by Which?

A third of consumers who have taken out a loan with payment protection insurance during the past five years may fall foul of at least one ‘significant exclusion’ that would prevent them from making a successful claim.

People who are self employed or on a fixed term job contract, for example, often aren’t covered by PPI. Nor are many people aged 65 and over, or people who might claim for absences relating to pre-existing medical conditions.

PPI is sold alongside loans, credit cards, finance agreements and mortgages to cover repayments if people are off work because of illness or unemployment. Which? estimates that around six million PPI policies - about a third of the market - were attached to loans at the end of 2006.

Which? found that the average loan is £6,000 with repayments mounting to £200 or more a month. However, ten per cent of people don’t know whether their loan is secured or unsecured, leaving them vulnerable to potentially losing their home.

Doug Taylor, Personal Finance Campaigner, Which? says: “We have always known that people were being mis-sold PPI, but we were still amazed to discover the scale of it. It appears that salespeople are chasing their commissions, their bosses are chasing profits - where’s the sense of responsibility to the customer?

If you are being offered a loan with insurance:


Does the adviser make it clear that the insurance is optional (if this was the case)?


Does the adviser tell you about the ‘significant exclusions’ under the policy? For example, the exclusion that states you won’t be covered for any pre-existing medical condition?

Paying for insurance up front

If you take out a loan or finance agreement, does the adviser make it clear that you would have to pay for the insurance up front in a single payment?

Borrowing to pay for insurance

If you have to pay for the insurance as a single premium, does the adviser make it clear that the insurance cost will be added to the loan and you will be paying interest on it?

Insurance expires before loan

If your PPI policy expires before your loan or finance agreement does, you will be paying interest on insurance that is no longer in force. Does the adviser make this clear?

Information on PPI

PPI only pays out for a limited amount of time, usually 12 months, although some policies offer a 24-month payout period.

Credit and store card PPI often covers only the minimum amount that must be paid each month.

When sold alongside loans or finance agreements, PPI is sold as a ‘single premium policy’, which means a lump sum covering the cost of the insurance is added to the amount you have borrowed, so you end up paying interest on both the insurance premium and the loan.

PPI policies last for just five years, so if your loan or finance agreement is for longer than this, you’ll still be paying interest on a policy that has long since expired.

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