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PPI Payment Protection Insurance Real Estate Insurance |
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| WARNING!!
Payment Protection Insurance can be very expensive and inappropriate! Definition of Payment Protection Insurance |
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Payment
Protection Insurance (also known as PPI, credit protection
insurance, loan repayment insurance, not to be confused with income
protection or credit card cover) is an insurance product that is often
designed to cover a debt that is currently outstanding. This debt
is typically in the form of a loan or an overdraft, and is most widely
sold by banks and other credit providers (such as used car dealers) as
an add-on to the loan or
overdraft product. PPI typically covers the borrower against an
accident, sickness, unemployment or death, circumstances that may
prevent them from earning a salary/wage by which they can service the
debt.
WARNING! PPI can be extremely expensive and inappropriate for most borrowers. A survey1 of lenders in the UK found the price of PPI varied from a low of 13% to a staggering 56% of the amount of the debt! A PPI policy can carry a huge commission to encourage an unethical salesperson to do all they can to add this policy to a loans and burry the fees in the paperwork. Often the cost of PPI is included in the intial loan so be very, very careful.
PPI usually covers minimum loan (or
overdraft) payments for a finite period (typically 12 months). After
this point the borrower must find other means to repay the debt, though
the period covered by insurance is typically long enough for most
people to start working again and earn enough to service their debt.
Note 1: "CAB evidence on problems with payment protection insurance" 13 September 2005 Article: How to Get the Best CD Rates |
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