PPI and its many components
The first step to understanding what payment protection insurance (PPI) is as well as what it’s not is to know that it is not insurance. Rather, it is just what the name says – payment protection. PPI is offered by the majority of lenders and financial institutions on a variety of credit cards, mortgages and personal loans.
PPI covers unfortunate, unpredictable life events such as accidents, illness or loss of job; events that may prevent you from keeping current with your monthly payments. PPI policy holders have a degree of comfort in these situations. After such an event occurs, the policy holder files a PPI claim. If the claim is approved, the policy provides funds to cover the monthly payments. In the event of death, the unpaid portion of the loan would be covered in full by the policy. Imagine the relief survivors would feel knowing that they don’t have to worry about an unpaid home or auto loan.
The types of PPI coverage vary by the seller and by type of loan. Minimum requirements must be met for most PPI claims. The most common requirement is the six month rule where a policy holder must be in possession of the coverage for at least six months before he would be eligible to receive benefits.