During these uncertain times, many people are cutting back on expenditure, worried about possible job losses amidst this economic crisis. Some people have opted to take out insurance in order to protect themselves against unknown economic catastrophes. One insurance product touted as a financial safety net is commonly called payment protection insurance.

Payment protection insurance or PPI is one of the most creative personal finance products that have been promoted by banks in the UK for very important reasons. It is an insurance product that covers one’s debt repayments like personal loans, mortgages, and repayments for credit cards. In hindsight, it is a reaction to the US financial crisis that led to the fall of the real estate industry. In 2008, millions of people in the United States have lost their homes due to bad financing schemes and bad credit rating that left them unable to meet debt repayment obligations.

How PPI works

When a policyholder takes out payment protection insurance, he or she will be protected from debt repayments in case they are not able to meet their obligations due to accident, sickness or unemployment. When the policyholder claims on the policy before the expiration date of the contract, the banks and insurance companies will need to validate whether the claims are authentic. Once deemed eligible for a claim, the banks and insurance companies from which the insurance originated will provide up to a whole year’s worth of debt repayments to the policyholder. However, debt repayments coverage will not be covered 100%. This will depend on the agreement or the type of PPI premium that the policyholder and the banks have agreed upon.

How to make PPI claims

Making ppi claims should be simple enough. Basically, all the policyholder has to do is to validate the claim. This is done by providing proof of sickness or in case he loses his job, a proof of retrenchment. For example, if the policyholder has an accident, he or she can make a claim by going to a hospital or seeing a doctor and acquiring a medical certificate stating that the policyholder is unable to perform their normal duties because of the current condition. This will then be presented to the originating bank or insurance company who sold the PPI. If the claim is rejected and the policyholder thinks the rejection is not justified, they can approach the Financial Ombudsman Service or FOS. The FOS is the body that sorts out financial disputes. The policyholder may present the same claims to the FOS and the agents there will be the ones to handle the disputed claims case.

How to obtain a PPI refund

Obtaining PPI refunds is different from making a PPI claim. A refund constitutes an error on behalf of the originating entity of the policy. These errors could be something that invalidates the sale of the PPI, whether unethical practices by the bank or financial institution, misrepresentation, misinformation, fraud, or something similar. Many people have filed complaints at the FOS for allegedly being mis-sold PPI. They claim that the banks who sold them the policy told them that the PPI is a requirement before they could take out loans. Some insist that the banks did not explain the full contents and consequences of the PPI, which they felt compelled to buy to be able to avail of a loan. In these cases, filing complaints at the FOS is a good choice.

The good thing about the FOS is that more than 80% of the complaints or disputes  are awarded to the policyholders whose complaints are about the mis-selling of the PPI. The FOS has a website where people can download template letters and guidelines on how to make a refund and know whether one is eligible for a PPI refund or not.

If all of this seems too confusing, you can also approach a regulated claims company, which will handle the claim on your behalf, usually for a set fee based on how much they manage to claim back for you. Use due diligence when choosing such companies and always ensure that they are regulated as required by law.

 



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