Health Insurance Net

This is insurance that is usually overpriced and incorrectly sold. This is how it works: Have you ever taken out a mortgage, personal loan, credit or store card? If you have, it's probable that the salesman, brochure or website “strongly recommended” that you also buy payment protection insurance (PPI), right? In fact, it's likely that you have a PPI policy and don't even realize it, as it is the UK's third-biggest general insurance product for personal customers, after motor and household cover.

But like all products that are given the hard sell, with PPI you have to be very wary of what you're buying, otherwise you're going to get robbed. You may even have seen in the press that these plans are under investigation, and it’s about time.

PPI is an optional insurance policy – you do not have to have it. It is usually sold alongside credit agreements, although there are a few stand-alone policies available from insurers and brokers. PPI is often called accident, sickness and unemployment cover (ASU), as it protects us from these risks. Borrowers receive monthly benefits if they have an accident, fall ill or lose their jobs. Life insurance to pay off the debt is also included in personal loan and credit card PPI, but not normally in mortgage PPI..

Some of the other commonly used names for PPI are: mortgage payment protection insurance (MPPI), personal loan protection (PLP) and credit card repayment protection (CCRP).

Just because insurance can be useful, it doesn't mean the price is worth it. Would you pay £750 per year to insure £45,000 of household contents? Of course you wouldn’t. It would mean that on average the insurer is taking more than four-fifths in profit. That's why you'd pay a much fairer figure closer to, say, £150. But that's the sort of scam people are facing when they buy PPI from a lender, be it a mortgage company, personal-loan provider or credit-card provider. The premium is out of proportion to the risk. It's not unusual for these companies to charge an extortionate £20 or more per month for every £100 of cover.

But stand-alone providers offer much cheaper cover at around a quarter or a fifth of the price you'll pay through the lender. One of the cheapest on the market offers, for a typical 30-year-old, charges of just £2.15 per month for every £100 on personal loan protection and £2 on mortgage protection. This means that many providers are charging ten times more than they need to, and that’s disgraceful!