If you have been watching the news lately or if you have been keeping yourself up-to-date with what’s on newspapers, then you must have encountered payment protection insurance. If you want to keep yourself protected from this very controversial policy, then you should be aware of what it is, as a lot of people find themselves with this kind of policy without knowledge of what it really is. Payment protection insurance, in essence, is a type of insurance policy that offers coverage for existing debt either from a loan, mortgage, or credit card, in the event of unemployment, disability, illness or death. Most people who have not encountered this kind of insurance policy before often wonder why there is so much controversy about it when it seems like a really helpful policy to acquire.

The basic principle of PPI is actually very desirable, as no one really wants to live in debt and when your resources are taken away from you due to some unfortunate accident or illness; it can be difficult to find a way to pay off your existing debts. However, payment protection insurance has been subjected to a lot of scrutiny lately due to the way it is sold to consumers. PPI is typically sold alongside a loan, mortgage or credit card. Most applicants who are offered PPI by their lenders are left with the impression that it is a requirement for securing a loan. While it seems easy enough to realize that it is not mandatory, millions of people still find themselves falling for this trap.

The biggest problem with payment protection insurance is the number of exclusions that the policy contains and the fact that these exclusions are not discussed with policyholders before applying for the policy. These policyholders often end up paying for very high premiums only to find out later on that they were not even eligible for PPI in the first place. Payment protection insurance does not offer coverage for people with pre-existing medical conditions. The policy also does not apply to civil servants, self-employed professionals and those who are unemployed at the time of application. It is because of these reasons that government agencies such as the Financial Ombudsman have to face thousands of complaints every month.

The mis-selling of payment protection insurance is an issue that the government has long been trying to resolve. In fact, the Competition Commission is already trying to issue a ban on the sale of PPI alongside loans, mortgages, and credit cards despite the refusal of lenders and insurance providers. The process of reclaiming mis-sold PPI is a very long and tedious one; especially since a blanket ruling about how to handle such complaints has yet to be enforced. As a result, people often run to no win no fee intermediaries to help them make a claim. The sale of payment protection insurance is definitely becoming such a huge problem, as about 90% of policyholders have been mis-sold PPI. If you don’t want this to happen to you, then you have to be extra cautious when you apply for a loan, mortgage or credit card lest you end up with an insurance policy that you cannot even benefit from.

Another issue that people have with PPI is the fact that it is ridiculously overpriced. This is why the Financial Services Authority created a list that shows a complete listing of lenders and insurance providers with their corresponding fees to find out where you can get the best policy with the cheapest rates should you decide to get one for yourself. If you do decide that you want PPI despite knowing all these controversies, make sure to get it from an independent provider so that you can get desirable coverage.