Payment protection insurance (PPI) is a way for Brits to protect themselves from a loss of income due to accidents, illness, or unemployment. For many people, a sudden loss of income can create substantial financial problems. Problems include an inability to provide for monthly family provisions and bills, as well as problems managing debt payments such as monthly mortgage and car loan payments.

There are several great benefits to buying payment protection insurance. While the insurance does not necessarily cover an individual’s entire monthly income, it does cover a substantial portion. Plus, one of the key benefits of the insurance is that it is tax-free. This means that the payments provided by the insurance incur no tax obligation, making the insurance much more valuable.

Another great benefit of the insurance is that it often comes with very few payout exclusions, especially when purchased from a private standalone provider. One of the mistakes some consumers make is purchasing the insurance directly from a lender or bank. Some mortgage lenders or banks pressure consumers to purchase the insurance, and often use deceptive sales techniques or questionable methods to make the sale. Sometimes, mortgage lenders will include the insurance premium as part of the mortgage costs, with or without disclosing this to the borrower.

Independent providers of payment protection insurance can often provide premium costs 40 to 80% lower than those offered by banks or lenders. Unfortunately, this is not something that is commonly mentioned to mortgagees, or insurance customers. While terms and conditions of policies vary, most independently provided protection packages include payment beginning 30 to 90 days following the covered event.

Protection plans typically run from 12 to 24 months and payments vary based on packages purchased and premiums paid. Individuals need to carefully consider their monthly financial needs in the event of a covered event. It is also important to remember that the insurance is intended to cover short-term income needs, and does not provide lifetime benefits.

A specialist insurance broker has a good knowledge of the protection cover industry and is more apt to understand the opportunities available and the best fit for each customer’s needs. Additionally, companies that sell these types of protection packages must maintain a good record of ethical and honest business practices in order to maintain strong customer respect. As with any product or service, especially insurance protection, customers must realize that specialists are more likely to have expertise suitable for their particular portfolio of products and services.

Payment protection insurance customers can do themselves a favour be researching to ensure that their insurance specialist is regulated and in good standing with the Financial Services Authority (FSA). The FSA has been especially critical of payment cover providers recently as there has been a widespread problem with several banks and large insurers mis-selling services, or engaging in questionable selling techniques. It is only sensible that a customer would by a product designed to offer peace of mind, from a company that invokes feelings of security and comfort.

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of payment protection insurance.

Tags | banks, consumers, Debt, insurance, lenders, mortgage lender, peace of mind