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Interest rates are plummeting - but so is the economy. If you are one of the thousands who may lose their job in the next few months, will you be covered by mortgage payment protection insurance policies? And if you think your job is at risk, can you still buy protection?
The answer to the latter question is a straight forward yes. If you have an inkling that your job is not secure, it could be time to buy a PPI policy, though not one of the extremely expensive policies sold by lenders.
Whether existing policyholders will be paid if they make a claim is much less clear. Over recent years, the lucrative PPI industry has ballooned to the point where it's now almost impossible to take out a loan, credit card or mortgage without coming under pressure to buy extra insurance on top.
PPI policies are sold on the basis that they would make the loan or mortgage payments if the policyholder is made redundant or becomes too ill to work, but they have some of lowest payout rates of any insurance products.
Consumer groups and journalists have long railed against the mis-selling of PPI - from policies sold to the self-employed that would never pay out, to the number of caveats in the small print that are rarely explained at the time of sale. They says it's no surprise that PPI sales accounted for a large proportion of the profits racked up by banks before the credit crisis.
The consumer group Which? has calculated that as many as 2m PPI policies have been sold to people who may never be able to make a claim.
The Competition Commission said in June that there were at least 4.3m active single-premium PPI policies in place at the end of 2006. If the Which? figures are right, a lot of people making claims will be disappointed.
Last month Which? called on the Financial Services Authority to impose sweeping reforms on the PPI industry following a number of fines for big-name loan firms including Alliance & Leicester and Liverpool Victoria.
"The fact that firms are still being fined for PPI failings shows that the problem won't go away on its own and PPI's relatively low profile means the number of complaints doesn't necessarily reflect the number of mis-sold policies," said Which? personal finance campaigns manager, Doug Taylor. He called for all victims of PPI mis-selling to be automatically compensated by "a fair and robust system."
Despite the negative headlines, Simon Burgess, managing director of low-cost PPI provider, BritishInsurance.com, says PPI is fundamentally still a good product, if it is bought from independent sources. "Quite simply PPI has been abused by the big banks, but if you bought a policy from a company like ours it will be there if you need to make a claim."
Burgess says his company would never knowingly sell a self-employed person a PPI policy and has systems in place to make sure policies bought are suitable for applicants. "The same is true of workers on contracts and temporary workers - they can rarely make claims on PPI polices."
He is also dismissive of critical illness policies, which he says rarely pay out as promised because they have so many caveats.
He says there's no reason not to buy a policy now. "As long as you haven't been formally notified that you are going to be made redundant there's nothing to stop you buying a policy. We have seen a big jump in business since the credit crunch bit, as people concerned for their future prospects decide cover is a good thing."
A look at his shows that a typical 40-year-old buying mortgage payment protection cover for a monthly payment of £750 would pay £33 a month. This would provide cover for unemployment and incapacity for 12 months. The policy has no excess and is considerably cheaper than similar policies supplied by the mortgage providers themselves. There is nothing to stop you cancelling an existing policy and buying a cheaper one from BritishInsurance.com.
It's worth noting that the length of time policies pay out varies, but is typically a year or two. Also, there is often an initial exclusion period of 30, 60 or even 90 days at the start of a claim, during which time you won't get any money. If you think you have been mis-sold a policy because a claim has been turned down, you should make a complaint. Begin the process of claiming back your PPI by going to which.co.uk/ppi.
Last month Alliance & Leicester was hit with a record £7m fine by the financial regulator when it was caught training staff to pressure loan customers to take out PPI. The FSA found evidence that A&L's call-centre staff had failed to give customers details of the cost of PPI, and that the bank had tried to sell the product "without properly considering its customers' needs".
This year, Liverpool Victoria has paid £840,000, GE Capital Bank £610,000 and HFC Bank £1.085m - all for mis-selling PPI.
Costly plan was a total letdown
One woman who feels let down after claiming on a mortgage protection policy is Dr Tanya Garrett.
The Birmingham-based clinical psychologist and divorced mother of two, has failed to have her mortgage paid off after claiming on her Halifax Total Mortgage Protection Plan - despite having to give up work after being diagnosed with an arachnoid cyst, which causes extreme fatigue.
Halifax agreed to pay her £1,600-a-month payments for the first 12 months of the illness, but refused to pay off the mortgage entirely because her condition is not deemed bad enough.
"I was previously very active, especially with two children aged 10 and 16. Now, I spend most of every day in bed," she says. "I've had a Halifax mortgage for over 20 years and always had the protection which, as the name suggests, is supposed to cover you in the event of serious sickness or unemployment. I was paying £200 a month."
She says that had she been diagnosed with cancer, or a number of other serious conditions, the plan would have paid off her mortgage. "I can just about keep my household going and do the basics, but little else. I am being retired from my NHS position and we shall soon be living on a relatively modest pension," she adds.
She was told that because she didn't have one of a long list of conditions, and because she wasn't totally disabled, the policy would not pay out.
After Guardian Money contacted Halifax, it agreed to review her case and issued this statement: "We are working closely with Dr Garrett to resolve this matter as quickly as possible. The first part of the claim has successfully been paid. A subsequent claim was declined. However, following further information from Dr Garrett, we are reviewing this decision."
m.brignall@guardian.co.uk
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