Despite the crackdown by the Financial Services Authority since it began investigating in 2005 after a super complaint by the Citizens Advice to the Office of Fair Trading, banks are continuing to “rip-off” consumers by raking in huge profits on payment protection insurance (PPI).
It is thought that banks are raking in around 80% in profits by selling payment protection alongside loans and credit cards. While the high street lenders remain tight lipped regarding the actual profits, the Competition Commission who has been conducting an in-depth review in to the sector is now using their resources to make the banks open their books.
Although taking the cover out alongside your loan or credit card seems the easiest option this is without a doubt the dearest option. It can cost you up to five times more than had you chosen to take the cover out independently with an independent provider. Not only does the high street lender get huge profits on the sales but they also get 90% of any profit if claims made on a payment protection policy are lower than what was originally thought.
Payment protection insurance is taken out by those who have a loan or credit card repayments to make each month and who fear they might come out of work sometime in the future due to suffering an accident, sickness or unemployment. Providing a policy is suitable for their circumstances then it would payout enough money for the individual to repay their monthly loan repayments without worry or struggling where to find it. You do have to check to make sure that the exclusions in as policy would not mean you are not eligible to make a claim. There are some exclusions which are common to all policies, being self-employed, retired, only in a part time position or if you suffer a pre-existing medical condition, but providers can add in additional exclusions so you have to read the small print.
It was the lack of information at the time of selling that led to the majority of policies being mis-sold; the high street lender gives very little information out at the time of selling the cover alongside their loans which led to many buying a policy they could not claim against.
Providing a policy would be suitable then it would five you a tax free income based on the amount your loan repayments are each month and your age at the time of taking out the cover. Once you had been out of work continually for the time stated in the policy you would get a payout for between 12 and 24 months depending on the provider. Usually a policy would begin to payout between the 31st and 90th day but again this is dependant on the provider and you have to check in the small print of the policy.
Buying payment protection insurance with an independent provider will ensure that you get the information needed to make sure that a policy would be suitable for your circumstances along with making huge savings and being assured of buying a quality product.