PPI – Limitations
This section details several limitations that applied to some PPI policies.
Limitation – becoming a carer
Not all PPI policies paid benefits if you gave up work to be a carer of an elderly relative or sick child.
A YouGov poll commissioned by Carers UK in 2013 showed a staggering 2.3 million adults have given up work to care for an elderly parent, disabled or seriously ill loved one.
Limitation – benefit period limited to twelve months
Payments to PPI policyholders were normally restricted to 12 months.
But what if the condition you suffer from lasts longer than a year?
Unfortunately no further benefits are payable.
Limitation – policies paid different levels of benefit
Payment protection insurance was widely sold in conjunction with personal loans and other types of finance; most notably alongside credit cards and store cards. The amount of benefit payable under policies issued to protect credit and store card payments was usually based on the current balance. The cover was expressed as a percentage of the amount outstanding and this sum would be paid during the benefit period. A common example is that for each £100 of debt on a credit card the insurance would cost 79 pence per month until it was repaid. The amount of benefit varied widely from one policy to another and we note below some examples that have applied in the past. The three numbers, as noted below, reflect the percentage of the debt that would be paid to the cardholder each and every month during the claim period.
Some PPI policies paid ten percent of the outstanding credit card debt
Others were limited to five percent
The lowest level was a mere three percent
Limitation – shorter working hours
We have been unable to find any PPI policies that protected the policyholder if they were faced with working for a lower number of hours than usual.
Citizens Advice Bureau produced a report about PPI in September 2005 entitled Protection Racket. They were also unable to find a PPI policy that offered cover should the plan holder suffer shorter working hours.
Limitation – Relationship breakdown
In the UK attitudes towards divorce have changed dramatically over the past seventy years. The stigma once attributed to couples that separate no longer applies. In 1936, King Edward VIII was forced to abdicate on the grounds of his intended wedding to Mrs Wallace, a divorcee. However, during the Twentieth Century, public opinion towards divorce became more relaxed and a liberalisation of legislation made them easier to obtain. This changing perception led to a dramatic increase in divorce rates, and they have remained high into the Twenty-First Century. Interestingly, data from the Office for National Statistics shows more second marriages survive than is the case with first marriages.
A report, in 2005, by Citizens Advice Bureau identified that relationship breakdown was a contributing factor for unplanned debt, pertaining equally to married couples and to individuals who cohabitated. The report identified that at least one PPI policy it reviewed provided protection in these circumstances; however, this valuable cover was not widely featured.
We believe it would have been appropriate for protection advisers to ensure their customers were aware that this particular type of cover existed. This is especially pertinent to those advisers who were granting credit to joint borrowers.