Types Of PPI
There are many different types of PPI policy on the market. In addition to this many companies have their own variations on the name they give to it for example RPC – Repayment Protection Cover. In essence whatever name it has, it is still payment protection insurance.
PPI on a Secured or Unsecured Loan
Single Premium Policy
The single premium policy is the most common offered in this situation. You will find that the cost of the premium is added to the amount you ask to borrow. The total is then turned into a loan and you pay back the total over the agreed term. This means you will be charged interest not only on the amount you took in actual cash but on the premium as well. This makes this a very expensive product but highly profitable for the company as they have now increased the amount you actually borrow.
A possible other problem with this type of PPI is that it may not cover the whole term of the loan. Sometimes a 5 year PPI policy will be sold on a 10 year loan.
Monthly Premium Policy
This is a slightly fairer way to offer PPI. The total cost of the PPI premium is divided by the number of month the loan is over. You will then pay this amount each month in addition to the loan repayment. The advantage of this is that no interest is charged for the PPI.
If your claim was successful on either of these polices it is usual that your monthly repayment would be paid for you for a period of time, usually between 12 to 24 months.
PPI on Credit or Storecard
PPI on credit cards works on a monthly premium being charged to the card. The premium is calculated based on the monthly balance on the card. The cost can range from 76p up to £1.50 per £100 of outstanding balance. This may not seem very high but for those people who regularly have a high balance on their card the amount can soon add up, remembering of course this is per month.
e.g Average of £2000.00 outstanding each month at 76p per £100 would, without interest be £182.40 per anum. At £1.50 per £100 the cost would increase to £360.00 per anum.
If your claim was successful on this type of PPI the payout can vary sometimes to cover just the minimum monthly repayment and sometimes a percentage of the balance.
PPI on Mortgages
This is most often a monthly premium policy which runs alongside your mortgage. You will normally choose the level of cover and the premium will be determined accordingly. You can either set it up to pay the whole month repayment or just a specified amount.
One of the disadvantages of this type of cover is with some policies if the policy is in joint names and one person claims they will only get half of the amount covered.
Lifestyle Protection Insurance
This is slightly different from true PPI as it is not connected to one specific loan. You will choose the amount you want to receive each month if you have to claim and the monthly premium is determined. You would then get that amount of money each month while you were claiming and you would use this to meet all of your financial obligations including mortgage repayments, bills, credit cards, living expenses etc.
Summary
On this page we have tried to detail some of the types of PPI that you might have been sold. It is possible to mis-sell any of these products so if any of the points on our questionnaire apply you could be entitled to compensation.
* This is a generalised summary of the types of cover there maybe policies which have added benefits such as paying off the loan if you are critically ill.
** The terms ‘claim’ & ‘claimed’ refer to using the policy and not making a claim for the mis-selling of it.
