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Before reclaiming or cancelling PPI you should have a look at the following notes and see what type of PPI you actually have. Always consider all the facts and figures before starting a claim. Whatever you do Do Not Just Jump In without researching your own policy, and don’t be afraid to ask for help / advice on the forums.
There are basically 2 types of Payment protection Insurance policies.
1) Monthly paid premium (as used by most of the credit card companies)
These policies should not be a big problem to cancel; normally they will cancel this type of policy if you write to them or Phone them. Of course if you consider that you have been mis sold this type of policy you can of course try and reclaim all the premiums that have been made, plus claim the interest on each payment at the Contractual Interest Rate.
2) Single Premium Policy (these are the biggest rip off ones) These policies are
Paid for in full to the insurance company at the start of the policy. Most loan companies will finance the full cost of the policy by adding the cost onto your loan. What they do not tell you is that you will also be paying interest on that amount at the loan interest rate for the full term of the loan.
Example 1.
PPI Cost £3300
Interest Rate 7.9%APR
Interest payable over the 5 year loan = £1300
Actual cost of PPI cover £ 4600.00
Example 2
PPI Cost £3300
Interest Rate 7.9%APR
Interest payable over the 15 year loan = £3913.00
Actual Cost of 5yr PPI Cover £ 7213.00
As some loans have variable APR the costs used in the above examples could be in fact a lot higher.
Most of this type of Policy will cover you for 60 Months (5yrs) so beware if you have taken out one of these policies and have a loan which runs over the 5 year period. As in example 2 you would require a further two 5yr PPI policies to cover the full loan period.
I did one calculation on an original loan of £17,000.00 , when the PPI was added and calculated to cover the 15yr period; with an APR at 7.9% fixed the actual cost to repay the loan was calculated at almost £55,000.00.
Cancelling a single payment Policy, This can be a bit trickier than a standard monthly paid policy. These policies will offer a very small percentage of the premium should you just cancel it. An example of this is shown below. Their answer to this part is normally that the insurance premium pays more in the early stages of the loan as there is higher risk. (Yeah - higher risk to the lender and not the Customer)
£3300 policy which had been running for 3yrs, Refund of £97.00 if cancelled.
Some companies will state that the only way that you can cancel one of these policies is to refinance and settle the complete loan agreement with a new loan without PPI on the new loan. Some of the lenders will also try and fob you off with excuses like, you may not get a new loan at the same low %APR without PPI. Some will also state that you may not in fact be able to obtain a new loan from them at all; this of course is all scare tactics to try and make you change your mind about cancelling the loan etc. If your credit rating is not good then they will use this against you too.
In my own case I managed to obtain a new loan from another provider at a far better %APR (5.8%) rate without PPI, though they did really try and sell their PPI..lol. I also took out a stand alone PPI policy from an Independent provider at well under a tenth of the cost I was quoted from the new Lender. Personally I have nothing against PPI Insurance, in fact I think it is a good thing as long as it sold properly and not at an extortionate rate like it is by the major High Street Banks and Loan Companies.
You should in the first instance read through the full terms and conditions of your Payment Protection Insurance Policy. If you do not have these I would personally advise you to contact the Insurer and request these. If you do have to contact the Insurer for a copy of the terms and conditions you will need to know the date that you signed up for the policy. Also request a copy of the terms and conditions relating to the policy that they had in place on that date.
Some Interesting Facts Regarding PPI.
If you have any queries please do not be afraid to ask for help or advise in the forum.
I would like to thank Reidnet who gave permission for us to reproduce this information.
There are basically 2 types of Payment protection Insurance policies.
1) Monthly paid premium (as used by most of the credit card companies)
These policies should not be a big problem to cancel; normally they will cancel this type of policy if you write to them or Phone them. Of course if you consider that you have been mis sold this type of policy you can of course try and reclaim all the premiums that have been made, plus claim the interest on each payment at the Contractual Interest Rate.
2) Single Premium Policy (these are the biggest rip off ones) These policies are
Paid for in full to the insurance company at the start of the policy. Most loan companies will finance the full cost of the policy by adding the cost onto your loan. What they do not tell you is that you will also be paying interest on that amount at the loan interest rate for the full term of the loan.
Example 1.
PPI Cost £3300
Interest Rate 7.9%APR
Interest payable over the 5 year loan = £1300
Actual cost of PPI cover £ 4600.00
Example 2
PPI Cost £3300
Interest Rate 7.9%APR
Interest payable over the 15 year loan = £3913.00
Actual Cost of 5yr PPI Cover £ 7213.00
As some loans have variable APR the costs used in the above examples could be in fact a lot higher.
Most of this type of Policy will cover you for 60 Months (5yrs) so beware if you have taken out one of these policies and have a loan which runs over the 5 year period. As in example 2 you would require a further two 5yr PPI policies to cover the full loan period.
I did one calculation on an original loan of £17,000.00 , when the PPI was added and calculated to cover the 15yr period; with an APR at 7.9% fixed the actual cost to repay the loan was calculated at almost £55,000.00.
Cancelling a single payment Policy, This can be a bit trickier than a standard monthly paid policy. These policies will offer a very small percentage of the premium should you just cancel it. An example of this is shown below. Their answer to this part is normally that the insurance premium pays more in the early stages of the loan as there is higher risk. (Yeah - higher risk to the lender and not the Customer)
£3300 policy which had been running for 3yrs, Refund of £97.00 if cancelled.
Some companies will state that the only way that you can cancel one of these policies is to refinance and settle the complete loan agreement with a new loan without PPI on the new loan. Some of the lenders will also try and fob you off with excuses like, you may not get a new loan at the same low %APR without PPI. Some will also state that you may not in fact be able to obtain a new loan from them at all; this of course is all scare tactics to try and make you change your mind about cancelling the loan etc. If your credit rating is not good then they will use this against you too.
In my own case I managed to obtain a new loan from another provider at a far better %APR (5.8%) rate without PPI, though they did really try and sell their PPI..lol. I also took out a stand alone PPI policy from an Independent provider at well under a tenth of the cost I was quoted from the new Lender. Personally I have nothing against PPI Insurance, in fact I think it is a good thing as long as it sold properly and not at an extortionate rate like it is by the major High Street Banks and Loan Companies.
You should in the first instance read through the full terms and conditions of your Payment Protection Insurance Policy. If you do not have these I would personally advise you to contact the Insurer and request these. If you do have to contact the Insurer for a copy of the terms and conditions you will need to know the date that you signed up for the policy. Also request a copy of the terms and conditions relating to the policy that they had in place on that date.
Some Interesting Facts Regarding PPI.
- On some Single premium PPI policies the actual cost for the insurance can be a low as 10% of the cost charged by the lender …That’s a whopping 90% straight profit for the lender.. Plus of course the extra Interest that they will make.
- Out of all the types of Insurances Policies available ( Car, Home etc) PPI has the lowest percentage of payout in claims, Making PPI the most profitable Insurance Policy currently on the market.
- Payment Protection Insurance has the highest rate of claims for Mis Selling than any other Insurance policy available.
- Most policies will only pay out for 12 Months maximum in any 1 claim.
If you have any queries please do not be afraid to ask for help or advise in the forum.
I would like to thank Reidnet who gave permission for us to reproduce this information.
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