Demystifying PPI
What is PPI ? How does it work? And what does it even stand for?
Starting with the easiest question first, PPI stands for payment protection insurance, although you may also hear it referred to as credit protection insurance or loan repayment insurance. The intent of PPI is simply this – to protect a loan holder from financial ruin if they are unable to make payments on a loan due to specific circumstances. Circumstances that are covered under PPI policies typically include inability to work due to accidents, illness, death or loss of job. Consumers can purchase PPI alongside mortgages and auto loans as well as credit cards and other types of loans.
If a policy holder finds himself unable to make a loan payment, he then files PPI claims against the policy. In the case of accident or illness, payments are covered until the policy holder is able to return to work and start earning and income again. In the case of job loss, payments are covered until the policy holder secures another position.
PPI can be extremely valuable and a true lifeline in times of personal and financial crisis. However, it can also be detrimental if it is not properly administered by the lender or understood by the consumer.