What did Payment Protection Insurance Cover?

PPI cover – Different benefit levels

Usually PPI was sold alongside personal loans or other kinds of finance, typically store or credit cards. The amount of money payable under polices tended to be based on the current balance of the account, with the cover expressed as a percentage of the outstanding amount. This sum would then be paid during the benefit period.

As an example, for every £100 of debt on a credit card, insurance would be charged at 79 pence per month until the amount was repaid.

There were vastly different levels for benefit payments on policies, with some common examples listed below. These figures represent the percentage of outstanding debt paid to the cardholder each month.

• Some PPI policies paid ten percent of the outstanding credit card debt
• Others were limited to five percent
• The lowest level was a mere three percent

12-month benefit period

Typically, payments to PPI policyholders had been limited to covering a 12-month period and, should the condition that makes you unable to work last longer than this, no further benefits are able to be claimed.

Reduction in working hours

We are yet to discover any PPI policies that covered the holder if they were forced to reduce the number of hours they worked. This lack of policies found is backed up by a report from the Citizens Advice Bureau in September 2005 that found the same issue.

Breakdown of a relationship

The same Citizens Advice Bureau report found that relationship breakdown was often a factor in accruing unplanned debt, in both married and cohabiting couples. The report found that, while there were a small number of policies that covered this scenario, protection was rarely included in PPI cover.

In hindsight, maybe this type of protection should have been given to more applicants, particularly those that included joint borrowing.

Becoming a carer

Not every PPI policy covered customers in the event of them giving up work to become a full-time carer to elderly relatives or sick children.

A YouGov poll on behalf of Carers UK found that 2.3 million adults have given up their jobs in order to become a full-time carer for a disabled or seriously ill family member, so this limitation affects a large amount of the population.