How is the Price of PPI Calculated
Posted on 22. Jan, 2012 by admin in Insurance
The cost of PPI can vary significantly from lender to lender. Among 48 lenders, the price of PPI ranged from 16-25% of the amount of the total debt. PPI premiums can be charged either on a monthly basis or the full premium can be added to the loan up front. This approach, which is known as a single premium policy, means that the money borrowed from the lender in order to pay for the insurance policy incurs additional interest. This interest is typically at the same rate as that on the original amount borrowed. All of this interest results in an increased effective total cost of the policy. The policy is paid for regardless of whether PPI claims are ever filed against it.
If the debt you are insuring with PPI is on credit cards, it is important to know that the cost is calculated differently than on lump sum loans like mortgages and auto loans. This is because there is no initial outstanding sum and it is not known if the customer will ever use the card to its fullest. However, if the customer does use the card to its fullest and the balance is not paid monthly, a fee for the PPI is charged in addition to the interest on the card itself. Understand what it means to be mis sold PPI and how you can make a claim.