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Financial Times
In sickness and in unemployment
By Sharlene Goff
Published: January 13 2006

After the recent controversy surrounding payment protection insurance, anyone about to take out a mortgage, loan or credit card, might feel inclined to risk illness or redundancy rather than pay over the odds for this cover.

PPI has come under intense scrutiny from regulators after a complaint that lenders were using hard-hitting sales tactics and often signing up people who would be ineligible to make an insurance claim.

But criticism has mainly been directed at the high street lenders. If you feel you still want cover, it could make sense to look to a number of independent brokers that will almost always offer you a better deal.

PPI cover safeguards loan repayments in the event of sickness, accidental injury or unexpected unemployment. The Association of British Insurers says that, as long as the policy is well structured and proper measures are taken to ensure its suitability, it can provide worthwhile cover.

High street lenders often automatically include PPI in their quotes but you can always ask for it to be excluded and then shop around for the best deal. Standalone providers, such as Paymentcare and Britishinsurance.com, generally undercut high street banks and building societies by at least a third – and some can save you up to 60 per cent – and they also often offer more generous and flexible terms.

Claims made through standalone policies can usually be backdated to the claim date, whereas policies from high street lenders often include a 30 or 60- day excess period during which no benefit will be received.

Independent brokers also generally allow policyholders to amend the terms of their insurance cover during the policy, cancel it at short notice and pay premiums monthly. They are also flexible about what the cover will include. You can elect just for accident and sickness cover, just unemployment cover or both and add life cover if you want.

High street lenders have been criticised for their “one size fits all” approach – especially as add-ons such as life cover can generally be obtained cheaply elsewhere. The high street banks also often demand lump sum PPI premiums upfront, which are added on to the loan and interest is charged on them as well as the balance of the loan.

According to Moneyfacts, Paymentcare and Britishinsurance.com tend to offer the cheapest cover for personal loans. Premiums for loan cover will vary according to whether you have cover for death, terminal illness, unemployment and/or accident and sickness. Britishinsurance.com has also just launched a low cost mortgage product, which claims to offer premiums at 68 per cent of the average price charged by the top 10 high-street lenders.

Nick White, head of personal finance at uSwitch.com, the price comparison website, says: “Banks have been trying to claw back money lost by offering low APRs and cut-price products.”

If you already have payment protection through a high street bank or building society you should look into rebroking with a third party but first check the terms and conditions of your existing policy. You may find that by cancelling early you are refunded only a fraction of the cost.

Andrew Hagger, head of news and press at Moneyfacts, said one disadvantage in taking out cover with a bank is that if you repaid the loan early, you would not necessarily receive a pro rata refund as the premiums were “front loaded”.


Telephone Paymentshield on : 0870 759 4000 for claims and administration
(Monday - Friday 8am - 7pm)


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