Payment Protection Insurance (PPI) What is PPI?
If you've ever taken out a loan, mortgage, credit card or store card, or bought something on credit, then the chances are someone tried to sell you payment protection insurance (PPI) at the same time.
The idea is that PPI covers your debt repayments if you can't work – for example, if you become ill, have an accident or if you are made redundant. However, many PPI policies have been mis-sold, which means you might spend a lot of money on expensive insurance you'll never be able to claim on.
Which? has been speaking out about the problems with PPI for many years. Other organisations – such as the Competition Commission, the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) - have also expressed concerns and have taken action to try and address the problems.
Claims management companies and PPI
Claims management companies (CMCs) - also sometimes called 'claim handlers' - have been springing up fast in the wake of the PPI mis-selling scandal. They offer to handle your PPI complaint in exchange for a fee.
Which? strongly advises that you consider your options carefully before deciding to use a CMC. Putting in a complaint about mis-sold PPI is straightforward, and we have developed a free tool to generate your PPI complaint letter for you, so there is usually no need to pay a company to do the work for you.
Most CMCs will charge you a percentage of your final PPI settlement as a fee, often as much as 30% of the value of your settlement. So, if you were due to receive a £5,000 refund of a mis-sold policy, a CMC could take as much as £1,500 of your money in return for processing your claim.
Some CMCs will ask you for an up front fee. If you do decide to use a CMC to handle your claim, we recommend you avoid this type of company at all costs. There is no guarantee that your claim will be upheld, so if you pay an up front fee you could be left out of pocket.
How to check if you have PPI
If you're not sure whether you have PPI or not, look at the paperwork sent to you at the time you took out your loan, credit card, mortgage or finance agreement. It is sometimes included on your repayment statements, and might be listed as 'payment protection insurance', 'loan protection cover', 'card protection cover' or something similar.
If you're still not sure, contact your lender or finance provider and ask whether you have PPI. If they don't have a reference number, but you believe that you have been sold PPI, ask them to provide details for whoever the underwriter is/was for their PPI products. You can then contact them directly so you can check whether they have a PPI policy reference number for you.
Don't leave yourself unprotected
We set up an online tool to help you complain about your PPI policy if you feel you were mis-sold. More than 20,000 people have used our tool to issue their complaint.
However, if your complaint is upheld your PPI will be cancelled and this may leave you without the financial protection you may need.
It's important to make sure that you do have some form of cover in place so that you would be able to pay any debts and essential expenses like your mortgage or rent and your utility bills if you were sick or you lost your job.
PPI only covers one item – and most people will need more than a PPI policy can pay out in order to cover all their essential outgoings. Read our Protection insurance explained guide for details of the different protection options available, including income protection.