There is a lot negative publicity about payment protection insurance, however it can be useful for providing short-term financial protection of your debts. You will most likely be offered PPI when you take out a loan, mortgage or credit card however you can actually shop around and get PPI from a cheaper source. Watch out for PPI when you are signing up for any financial product – it is often automatically included with just a small checkbox to opt out.

PPI covers your bills (such as your mortgage) if you are unable to meet your repayments for some reason such as a period of unemployment, an accident, illness or death.This gives you time to get back on your feet. Protection is normally short-term – generally about twelve months. There are usually terms and conditions such as a period of a few months between the accident etc before the PPI is paid out – generally, the more you pay for your PPI, the shorter the excess period is. Make sure you read all the small print associated with your PPI when you take the policy out so that you are aware of any constraints on the policy, and whether you are eligible to claim on the policy. Do not feel under any pressure to take out a PPI – think carefully about whether you really do need it or not.

Adding a PPI onto your financial product can often add thousands of pounds of interest. Ask yourself the following questions before taking the PPI out:
- Am I eligible for cover? (eg a lot of PPIs will not cover self employed people) [about 15% of claims a year are rejected because the person was not covered]
- Is the length of cover suited to me?
- What is the waiting period?
- What are the exclusions on the policy?
- Does it meet all my needs? Do I need all the options on the policy or could I just use part of the policy eg I don’t think I will get sick, but I might lose my job so I only need the employment part of the policy
- What are the penaltiy charges if I decide to switch my PPI policy, or I decide I don’t need it any more?

PPIs prices can change significantly depending on your lifestyle. Some companies offer discounts for young people, however most will not cover self-employed people. There may also be restrictions on whether you can claim for common health complaints such as stress and back-ache. Claims for stress are normally only paid out after you have a medical report from a qualified psychiatrist stating you are suffering from clinical stress. Claims for back-ache are normally only paid out when you have had x-rays, an MRI scan or proof of a medical abnormality. If you have a change in circumstances such as a change in employment status, it is important to notify your insurance company as soon as possible.

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