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Wednesday, 3 October 2023

Protecting your income or loan/credit payments

Payment protection insurance (PPI) covers regular payments you make on borrowing or credit if you can't work due to an accident, sickness or unemployment. Income protection pays a regular income in these circumstances. These policies are sometimes called ASU (accident, sickness and unemployment) insurance. Premiums can be high.

Payments covered by PPI

Depending on the policy PPI may cover repayments (or a percentage of them) on:

  • a mortgage
  • a loan
  • credit/store cards
  • catalogue payments

Bear in mind that most PPI policies don't pay out right away, and most have limitations and exclusions. For example, they will often only pay out for a limited period. Find out more on the Money Advice Service website.

Income protection insurance

Income protection insurance aims to pays out an income that equates to your after-tax earnings (less an adjustment for State benefits) if you become unable to work due to an accident, sickness or unemployment. As with PPI most policies don't pay out right away, and most have limitations and exclusions.

Choosing your insurance

When you buy insurance you can shop around yourself and buy direct after comparing products, or use an insurance broker. You can compare PPI on the FSA's Comparison tables.

Anyone selling PPI or income protection insurance in the UK must be authorised by the FSA. This means they must follow certain rules and standards when dealing with you, and give you information explaining the service and products they offer.

Buying with or without advice

Brokers who are authorised to offer insurance advice will consider your individual needs and only recommend a product if they think it suitable. Others can offer information but not advice; in this case it's up to you to decide on a policy after comparing the alternatives. If you buy without advice you have less protection if the policy turns out to be unsuitable.

Find out more about the pros and cons of buying with or without advice in the 'Getting advice on insurance products' article below.

Additional links

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