The ABCs of PPI

Payment protection insurance can be confusing, but it doesn’t have to be. Payment protection insurance, which is commonly known as PPI, is an insurance policy that is intended to cover your loan payments in the event that you are not able. Most often sold with mortgages, PPI provides its policy holders with assistance in making payments in the event of an interruption in income due to illness, accident or loss of job.

PPI certainly sounds beneficial and it can be. However, there are some things that you as a consumer must be aware of. First, PPI is always voluntary. It is a purchase that you choose, not one that is chosen for you or that you are coerced into making. Some loan providers have been guilty of requiring borrowers to purchase PPI as a condition of loan approval. Others have simply written a policy, and its premiums, into the loan without the consumer’s knowledge.

The cost of a PPI policy depends on the size of the loan. Most often the cost of the premium is rolled into the monthly loan payments.

PPI can be a good thing to have, if you make an informed decision and have all the facts about eligibility and coverage. Do your research and work with a lender you can trust.