Looking for PPI Compensation During IVA?

iva and ppi

You must have come across many cases where a person in debt has suddenly lost his/her job or income possibilities. This could be due to death or illness or some other reason such as an accident. Even though these things are not in anyone’s hands, that doesn’t matter when it comes to debts. 

No matter how adverse the situation is, your debt always remains unless you pay it. In some cases, you might be able to get it written off using debt management plans or relief orders. 

But those things are not so easy to avail. Some are costly while others have criteria that few people can fulfil. Even if they are able to get such an arrangement, they might not be able to pay. For such cases, you might want to go for income protection, such as payment protection insurance (PPI). Further, you must also know whether IVA and PPI together or not.

What do you need a PPI for?

Suppose you have taken a loan or a mortgage and want to make sure that you’re able to repay it. Creditors nowadays generally demand monthly repayments and not the entire amount at a time. 

To make sure you’re able to pay them, you can get income insurance. If done right, these can be very helpful, in case you lose your income due to various reasons. No, there are different types you can choose from, and payment protection insurance is one of them. 

So, a PPI is a means to cover the monthly payments of your debt, in case you’re not able to pay for some reason. Now, this insurance has a limited time period.

How do you get a PPI?

You can buy a PPI along with a loan or mortgage. Basically, it is sold with any product that you have to make repayment for. Sometimes, people get mis-sold a PPI. In other words, it is possible that you have bought one, without complete knowledge about its working procedure. In general, you can buy a PPI directly from an insurance company or from a financial adviser, who might have to pay some extra charge.

What is covered by a PPI?

A PPI can be used to cover the monthly instalments, typically for a short time period. As such, it would be most suitable for covering monthly instalments of mortgages and credit card loans. 

The circumstances when you can claim it depends on the policy that you get. Mostly, a PPI would cover your monthly payments when you’re unable to pay because of an illness or loss of employment. 

Based on the policy you opt for, it can also cover the payment after your death. This would be very beneficial for your family as they would be able to make a claim on the policy. 

How much does it cost?

The cost of getting a PPI is not the same for all cases. You might have to pay more than the other person you know. It depends on certain factors. The cost is usually 10% of the payment, in case of a personal loan. 

Who is eligible for a PPI?

Anyone who wants to cover monthly payments for a loan or mortgage can get a PPI. Basically, anyone can get it, but not everyone needs it. So, it is important that you know when you don’t need it. 

First, there are a lot of cases in which people get help from their families in repaying their debts. If that’s the case with you, there is no need for you to get a PPI. Another case where you don’t need a PPI is if you have enough money in your savings to be able to pay the instalments. 

Even some employees provide an arrangement like a PPI to their employees. In such cases, the salary of the employee is covered in case of sickness for a period of time. This is provided as a benefit, so you must check if your employee provides any such benefits. If yes, then you’re good to go and certainly don’t need to get payment protection insurance. 

What considerations should you take before getting a PPI?

Like any financial matter, you must make careful considerations before buying a PPI. The very first thing you must check is the price you have to pay for it, for the entire period. You might find the monthly amounts to be very affordable. 

But, you must always add them up and find the total cost of the full term. Another very important thing to consider is whether the policy covers all that you require. For example, some policies don’t cover death while others do. 

In addition to that, it is also important that you carefully consider the benefits that you get with the policy. In some cases, you might be asked to pay the full amount of the insurance. If it’s unfavourable, you can look for a different policy as there are lots of them to choose from. 

What can be considered as mis-selling of PPI?

There are many different ways a PPI might be mis-sold to a customer. If you have a PPI and come to know of it, much later, after getting it, it has been mis-sold to you. Another common instance is that you are somehow made to think that getting a PPI with a loan is mandatory. 

You must note that this isn’t true at all. It is completely up to you whether you want payment protection. If your lender didn’t provide you with certain important information before you took out the PPI, that is considered as mis-selling, too. For example, if you were not informed that it doesn’t provide the cover that you require. In all these cases, you can and you must reclaim the money. 

How do you reclaim money from a mis-sold PPI?

If you have been mis-sold a PPI, you would want to get your money back. Fortunately, that is possible. If you want, you can work on getting it back all by yourself. Otherwise, there are many claim management companies that may help you. 

But, you must note that they would keep a percentage of the amount, sometimes as much as even 40%. Whereas, if you do it yourself, you’ll be able to recover the complete amount. 

How is PPI compensation dealt with in an IVA? 

If you have got an IVA and PPI at the same time, the debt that it covers may or may not be included in the arrangement. In these cases, the money from your PPI would be treated as an asset. That means whatever money you receive as recompensation would go towards clearing your debt. 

This might also help you to complete the IVA quicker. But, in some cases, you might be required to pay it even after the completion. If the debt covered by the PPI is before the IVA, your insolvency supervisor can collect the amount even after your debt is cleared. Moreover, if the IP asks you to claim the money to pay for the debt and you don’t cooperate, the arrangement would be at risk of getting terminated.