The number of UK mortgage borrowers opting for payment protection insurance (PPI) Mortgage has risen significantly over past years. If figures are to be believed, more than 13 million people have chosen this path to find a solution for mortgage repayments. However, the scene is getting cleared and experts have started concluding that rise in popularity of PPI has been facilitated by the lack of knowledge of consumers. Even the expensive nature of these policies has not restrained borrowers from purchasing them. This is because such customers are unaware of other alternatives available to handle such situations.

PPI – Some unworthy Aspects

• Expensive than other insurance policies.
• Provides benefits only for 12 months.
• Restricted to credit payments and other similar expenses.
• The lenders selling PPI often hide cheaper alternatives available in the market.

In fact, the hard sell approach of lenders has enforced the Competition Commission to take a strict action and ban the sale of PPI policies. The commission had been looking at the complaints made by consumer groups and finally followed this course of action recently.

New Rules of Competition Commission

The commission has instructed the lenders selling PPI policies to inform the customers visiting them about the expensive nature of these policies. Also, the lenders have been asked to share information about cheaper insurance alternatives with the customers, so that can take an effective decision.

While some of the insurance industry leaders have agreed to the modifications, majority of them term them as wrong decisions. According to them, the benefits of PPI policies must be kept in mind, which facilitate the people facing the problem of repaying their mortgage in case of emergency situations like, lose of job, accidents and health constraints.

Evaluation of Alternative Policies

There are many alternatives to PPI policies, which are capable of offering many more advantages than these expensive plans. First one is the ASU covers, which provide assistance in case of accidents, sickness and unemployment. And the good news is that premiums demanded by these plans are much lower than those associated with PPI. Similarly, there are income protection plans, which not only provide cover for a good proportion of your salary, but also aid your financial needs up to the age of 65.

The conclusion is that the concept of PPI has taken the advantage of unfamiliarity of people with alternative insurance plans available for emergency situations. But now, the path for these tailor-made plans is going to be clear with a number of question marks encountering the essence of PPI. 

By Nancy Dodds of Financemate.co.uk