Mortgage Payment Protection Insurance has been widely sold for many years by most banks and building societies. The policies cover mortgage repayments if the borrower cannot work due to accident, sickness or involuntary unemployment. For many people a mortgage is the largest financial commitment of their life and taking out insurance to cover repayments seems like an essential measure.
The trouble with Nationwide PPI and other similar forms of mortgage payment protection insurance is that it often has a high number of exclusions meaning the level of payouts for this type of cover can be quite small. A 2008 investigation by The Competition Commission found that only 28% of people who try and use their mortgage PPI policy are successfully in doing so. This compared to 79% for car insurance. This means for every £1 spent on mortgage insurance lenders make up to £0.72 profit.
Some of the exclusions attached to mortgage Payment protection policies, such as Nationwide PPI, include common medical ailments such as back pain, depression and stress. Other policies have no provision for relationship breakdown or instances where a policyholder has to take time away from work to care for a sick family member.
Given the cost of mortgage PPI can be around 25% of the core mortgage amount it can also be an expensive cover. On a £100,000 mortgages it could potentially add another £25,000 to the borrowing plus interest.
The high cost and the relatively low payout rates mean that mortgage PPI can represent poor value for money. In addition, there have been many recorded incidents when mortgage PPI has been mis-sold.
There are a wide variety of errors at the point of sale which may lead to a policy being mis-sold. Some examples are listed below.
• The policyholder was given misleading information. E.g. that taking out payment protection insurance would improve the chances of the mortgage application being approved.
• The policyholder was given incorrect information. E.g. that the payment protection cover was compulsory.
• The policyholder was sold a policy that was not suitable for their needs. E.g. the policyholder was retired. As PPI is designed to cover for loss of employment it would clearly not be suitable for someone who had already retired.
• The policyholder was put under undue pressure to take up the cover. E.g. they were hurried, intimidated or made to feel guilty.
• The policyholder was sold a policy that would not cover the whole length of their loan. Single premium PPI policies typically only last for five years. Many people, with longer term loans, were sold this cover without being told it would not cover the total repayment period.
• The policy was added without the customer’s knowledge or consent.
• The policyholder was sold the policy without the full cost, terms and conditions being explained.
If you are interested in reclaiming PPI call our claims team on 0207 471 2000. We have a wealth of experience helping customers make PPI claims and can often resolve complaints in just 8 weeks.
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