Debt & Borrowing

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Payment Protection Insurance (PPI) is often sold alongside loans, credit cards or mortgages to cover repayments if you are unable to work through accident, illness or unemployment in some circumstances. It has picked up a bit of bad reputation in the last year or two, not because it was a poor product, but because it wasn't always being sold in the right way.

After having a look at what has gone wrong in the past the Competition Commission has come out with a report this month that will, by late 2010, ban completing the PPI application at the same time as taking out a loan or other finance.

You'll get a 7 day gap period between taking out your loan and any PPI proposal being completed. That gives you a useful bit of time to hunt out the best deal, saving money along the way.

So far so good, but there could be a few hidden downsides here.

Some PPI providers may find it too expensive to change their systems to meet the new requirements and will withdraw their products. They might do that quite soon. That in turn may have the effect of pushing prices up, which isn't what the Competition Commission will want. With fewer providers it might make some PPI, particularly stand alone PPI, much harder to find.

And whilst a delay period sounds good, buying behaviour can often be to take the “do nothing” option if a barrier is put in the way. If you're buying PPI for the right reasons, and at the right price, not buying might be the wrong move in a recession.

So what should you do? Well firstly if you're in the market for standalone PPI now might be a good time to hunt for the best deals. Secondly, if you get a period to think about what you want to do then use it, but don't make it an excuse to do nothing if the product is right for you.

Let us know what you think and if you find some good deals you can share with others.

Sam Jackson

Money Dashboard

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