Payment protection insurance
Many credit cards will offer you payment protection insurance, or PPI. When you fill in your application form you will be asked whether you want to take out any PPI cover. You can also ask your credit card company at a later date if you should want PPI cover on your account.
PPI provides insurance protection for your repayments in the event that you lose your job, have an accident, become ill, or die. If any of these things happened your card company will pay-off a percentage (say, 10%) of your outstanding balance each month, usually for a maximum period e.g. twelve months. If you were to die, PPI will usually pay-off your outstanding balance in full or at least to a maximum amount.
This insurance is usually charged in terms of pence per £100 on your balance. For example, if in a given month you have a balance of £1,000 and PPI costs 75p per £100 then you will be charged £7.50 (75p x 10). Premiums are normally applied automatically to your account each month.
Read the Terms & Conditions of PPI carefully to make sure:
- that you are covered
- what you are covered for
- how long the cover lasts
- how much it costs
- how much it will pay out.
For example, you may not benefit from PPI if you are self-employed, in temporary work or over a certain age.