Payment protection insurance (PPI) explained

Payment protection insurance (PPI) is designed to cover your debt repayments in circumstances where you aren’t able to make them such as accident, redundancy, or illness. However, we’ve found PPI was mis-sold to many people, who may now be able to claim a refund. 

If you’ve ever taken out a loan, mortgage, credit card, store card, or bought something on credit, such as a car, you may have been sold a PPI policy. However, since 6 April 2012 rules state that a company cannot sell you PPI at the same time as taking out credit.

How to check for PPI

​On statements, PPI may also be called ‘loan protection, credit insurance, loan repayment insurance, ASU (accident, sickness and unemployment) insurance, account cover or payment cover.’ See our checklists to find out if you may have PPI and how to claim if you were mis-sold.

Only those companies regulated by us are entitled to sell PPI. If you are unsure about any firm selling PPI, you can check it is – or has been – regulated by us via the Financial Services Register.

What is covered

Usually, a PPI policy protects you from new circumstances that mean you can’t make your payments, such as: 

  • accident, illness or disability
  • certain circumstances that stop you working
  • death

The policy will usually keep up your repayments on a loan, mortgage or other credit for up to a year, sometimes longer.

If the policy includes life insurance, in certain circumstances, the debt can be fully paid off if you die.

Protection plans vary. If you decide to buy PPI, shop around for the right policy for your circumstances. Read through the policy terms and conditions to see how it works. 

PPI policy features 

Features to consider include:

  • How much will the policy cost?
  • Do you have other insurance which could cover your repayments?
  • Is there a limit to the benefit you may receive from a claim?
  • How long will the policy cover your loan or debt repayments?
  • Does the cover start immediately when you make a claim?
  • What types of injuries and accidents are covered? What isn’t included? (stress or back problems, for example)
  • Does the policy cover any injury or illness you had before taking it?
  • How long do you have to be in permanent employment before you can claim?
  • Does the policy cover you, if you are self-employed?

Other types of insurance to consider 

PPI is not the only product that can potentially protect you against loss of income and may not always be the right one for your circumstances. You could consider income protection, an independent insurance that can protect you from loss of income. Or another short-term protection insurance.