60 second guide to reclaiming PPIMust-know facts about Payment Protection Insurance
09 May 2011
As the British Bankers' Association announces that it will not appeal against the High Court judicial review on PPI mis-selling, we explain what PPI is, what's wrong with it, and how you can reclaim PPI for free.
What is PPI?
Payment Protection Insurance is designed to cover your debt repayments if you can't work – for example, if you become ill, have an accident or if you are made redundant. It was often sold alongside a new loan, mortgage, credit card or store card.
How can I tell if I've got PPI?
If you're not sure if you have PPI, look at the paperwork sent to you at the time you took out your loan. If you're still not sure, contact your lender or finance provider and ask whether you have PPI.
What's the problem with PPI?
There are many problems with Payment Protection Insurance, including:
- Mis-selling: Many consumers have been sold policies they can never claim on. The self-employed and students, for example, often can't claim
- PPI cover runs out: Before it was banned by the Competition Commission, single premium PPI (SPPPI) was often added as an upfront lump sum to your loan. Most PPI policies only last for five years, so if your loan or finance agreement term lasted for longer than this, you'll still be paying interest on insurance that has long since expired
- Over-priced: Adding PPI to a £7,500 five-year loan could cost a wholly disproportionate additional £2,000-£3,000
- Short pay-out period: PPI linked to mortgages, credit cards or store cards usually pays out for a limited amount of time only. Often this is just 12 months
- Low cover levels: On some credit card PPI contracts, the insurance only covers the minimum monthly payment, meaning your balance may never reduce
How can I tell if I've been mis-sold PPI?
You may have been mis-sold PPI if:
- Optional: It was not made clear to you that the insurance was optional
- Exclusions: You were not told about significant exclusions under the policy – for example, that you won't be covered for any pre-existing medical condition
- Interest: The adviser did not make it clear that the insurance cost would be added to the loan and you would be paying interest on it (if you were sold single premium PPI)
- Expiry: If the adviser failed to tell you that the PPI cover would run out before the loan was paid off (if this was the case)
- Advice: If you bought PPI after 14 January 2005 and the adviser tried to persuade you to take it out by saying something like 'we strongly recommend that you consider taking out PPI'. If so, the sale counts as an 'advised' sale and they should have issued a statement to show why a policy is suitable for you
- Not notified: PPI was added to your loan or mortgage without you being told.
What's the alternative to PPI?
PPI only covers one debt, making it very inflexible. That's if you can claim at all. If you're unable to work, you'll probably need protection cover that replaces part of your income instead. Many consumers would be much better off with income protection insurance.
How do I claim compensation for mis-sold PPI?
If you think you may have been mis-sold PPI and haven't yet made a complaint, the Which? online PPI claiming tool, is a quick and easy way to reclaim back mis-sold PPI.
Although some customers choose to use Claims Management Companies (CMCs) to help them reclaim mis-sold PPI, it is easy enough to do without their help. We would advise against using them, especially if they ask for money up front.
Do I have to pay to put in a PPI claim?
No. You can put in a claim yourself using the free Which? online PPI tool. There is absolutely no need to pay a claims management company to put in a claim for you and you should avoid these companies at all cost.