Payment Protection Insurance (PPI) is insurance designed to cover the cost of your loan repayments in the event you become unemployed or are unable to work due to illness or an accident.

PPI can also go under the term Accident, Sickness and Unemployment cover (ASU) or Personal Loan Protection Insurance.

If you have taken out a personal loan it is likely the bank or loan provider tried to sell you PPI at the same time. In theory PPI is not a bad product for those who need it and assuming it has been sold correctly. The problem lies in whether you were fully advised regarding the product before you signed up to it.

If you purchased PPI when taking out a loan, the cost of the premium would have been added on to the amount you initially wanted to borrow. This is an expensive way of funding the insurance as it attracts further interest on the loan.

Was this explained to you at the time?
A good compliant sales process should fully inform you of the cost of the insurance and how much you would end up paying for the premium over the full length of the loan once interest has been factored in.

You should have been advised that the PPI was optional and it was entirely your decision whether you wished to purchase it.

Many lenders have mis-led customers into thinking the PPI was a condition of getting the loan - i.e. that in purchasing the insurance the loan is more likely to go through.

Some lenders may even add PPI to the loan agreement without the customer even knowing they have it.

PPI is not a compulsory insurance and you should always have been given the option as to its purchase.

PPI policies can have limited cover and usually contain many exclusion clauses preventing you from being able to claim under the policy. Lenders were under a duty to assess whether the PPI was suitable for your needs and was the right product for you.

They should have explained to you that the policy you bought did not cover any pre- existing medical conditions. So for example if you suffered from a bad back prior to taking out PPI and then were off work due to that condition whilst the policy was active, it would not pay out.

Equally the lender should have checked whether you had any other policies or employment benefits which would cover your loan repayments in the event you were off work. Many people receive full sick pay for 6 months in the event they are off work. This means that the income they receive during that period would not alter if off sick and so a PPI policy may not therefore be of any additional benefit.

Additionally lenders were under a duty to establish you were eligible to rely on the benefits of the PPI. If you were unemployed, not in full time employment or over the age of 65 at the time of taking out the PPI, then the policy would never pay out as it would not cover you.

If you were self employed when taking out the policy then it is likely the policy is severely restricted in the circumstances that you can claim and this should have been pointed out to you.

In most cases PPI will cover a period of 5 years maximum whilst the actual loan agreement can go on for 10 / 15 years if not longer.

This should have been pointed out to you.

If you think you may have been mis-sold PPI then get in touch and our dedicated PPI mis-selling team will establish whether or not you have a valid claim. You should not delay in contacting us as there are timescales within which to claim.