There may be a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but we estimate that it will be £295.00

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBTS SECURED ON IT

What is it?
Payment protection insurance (PPI), is insurance that will pay out a sum of money to help cover your monthly repayments on mortgages, loans, credit/store cards or catalogue payments if you are unable to work. This could be because you have an accident or sickness, or become unemployed through no fault of your own.

This means that the insurance company will pay the monthly repayments (or a percentage of them) on your behalf for a fixed period of time if you become unable to work.

PPI can provide cover against unexpected changes in your personal circumstances, but bear in mind its limitations and exclusions.

Where might you get it from?
You are likely to be offered PPI by the company when you take out a loan or credit agreement, but you do not have to buy it from them. You can buy it yourself separately from insurance brokers, including over the internet. Shop around to get the best deal for you.

PPI is useful, but you may not always want it or be able to claim on it when you need to.

What are the main features?
PPI is almost always optional – you should not normally be refused a loan if you decide not to buy it.

PPI only pays out for a set period of time, generally either 12 or 24 months.

To claim on the unemployment part of the policy typically you must have been employed continuously by the same company for the last 12 months on a permanent contract.

You may not be able to make a claim for an illness you already have or have had before. Make sure you check this before you take out the policy.

Stress or back complaints, and possibly other conditions, may not be covered, even if you can not work because of them. It's worth checking before you take out the policy.

You have a legal right to cancel the policy and get a refund within 14 or 30 days of taking it out.

What does PPI cover?
What the insurance covers will vary depending on the sort of repayments the policy is designed to protect, and on the terms of the particular policy.

The following benefits are typical for different types of PPI cover:

Mortgage – The insurance covers your monthly mortgage repayments for a set period of time. The maximum number of monthly repayments that the insurance company will make is usually 12, but it can sometimes be 24. This means that after this period you will have to pay your monthly mortgage repayments yourself.

Credit and store cards – The insurance will generally pay off a percentage of your outstanding balance or the minimum payment each month for up to a year. Check which option is being offered. This means that you may still have to pay any balance left after this time.

The insurance typically only provides cover for the amount you owe when you make a claim, and not any balance you build up after this.

Loans – The insurance will cover your monthly repayments for the loan – generally for 12 or 24 months. After this period you will have to pay your monthly loan repayments yourself.

If the insurance for any of these products contains life insurance, then the cover will generally pay off the balance of the debt covered if you die. If the claim is for disability, the monthly repayments may be paid to the end of the life of the loan.

What should you do?
Think carefully about the risks you could face while paying back a loan, mortgage or credit/store card and whether taking out PPI would be to your advantage. If you had an accident that stopped you from working, would you have enough savings to be able to continue paying off the loan?

Consider whether you have other insurance which already covers you (for example through your employer), or whether other types of protection insurance may be more appropriate.

Don't be pressurised into buying it - you don't usually have to take out PPI to get a loan and you don't have to buy it from the same place you get your loan from.

Find out whether the firm is giving you advice, if not, consider whether you need advice. Getting advice means that the firm should recommend a PPI or other policy that meets your needs.

Find out whether the policy is a single or regular premium. If you buy a single premium policy you pay a lump sum of 3-5 years' worth of premiums in advance. This amount is added to the sum you borrow and attracts interest, so you'll be paying more over the long run.

Think about what you would do when the claims payments stop and you are still unable to work. How would you pay the rest of your loan?

Check to see what you will be covered for and what won't be covered – for example any exclusions relating to the nature of your employment or your medical history.

Check what you will get back if you cancel the policy or repay the loan early.

Do I have to take out PPI and what would happen if I didn't?
No. If the firm insists on PPI cover to get the loan, you should consider whether you really want to take the loan with that lender.

Think about the cost of PPI and the amount that will be paid out if you make a claim on the policy. Check whether payments from a PPI policy would affect the benefits that could be paid from any other protection insurance that you already have.

If you don't take out PPI think about how you would pay the loan, mortgage or credit/store card payments if you were sick or had an accident and were unable to work or became unemployed. See our Insurance section for alternatives to PPI.