If you bought a car before 2011, you perhaps dealt with a finance company that provided a ‘bundle’ of products when you got your loan. That bundle sometimes included payment protection insurance – otherwise known as PPI.
Unfortunately, PPI was often sold to a customer even if they didn’t need it, or in some cases, even if customers didn’t realise they were paying for it. This mis-selling led to a national financial scandal – and has resulted in billions of pounds being paid out to victims.
While PPI mis-selling dominated consumer finance news for a number of years, there are still cases in which PPI is sold legitimately and can provide useful cover for car finance payments.
Here, we’ll look at what PPI is, whether you can still claim, and the circumstances in which PPI is still used.
What is PPI?
PPI was a type of insurance product that was sold with a range of finance products – including car loans. It was designed to protect you if you were unable to work and could no longer make the repayments needed to keep your car. For instance, if you were made redundant – you may have been able to claim on your PPI and have you finance payments paid for a certain period of time.
In some cases, PPI was added to the amount you borrowed to buy your car upfront, although in other cases, PPI was a monthly add-on to your premium and paid separately to your loan repayment. Adding PPI to a car loan upfront was banned in 2009 – and shouldn’t have been sold after that.
Can you still claim if you were mis-sold PPI?
If you had a claim for PPI compensation, the deadline has unfortunately now passed for claims against the companies that offered car loans with PPI.
That said, there are some exceptions to this rule. If your PPI policy was sold after 29 August 2017, you may still be entitled to claim. Also, if you started your claim before the 29 August 2019 deadline, you should still expect to hear back from the company in question.
Is PPI still available from car finance companies?
Although it has received overwhelmingly bad press since the scandal broke, PPI was a legitimate insurance product that could benefit some people. As such, PPI and similar products are still available – sometimes still known as PPI, or sometimes as ‘income protection’ or ‘loan protection’.
Since the problems with PPI, lenders can no longer ‘bundle it in’ as part of your finance deal – and you’ll generally have to go to an independent insurance firm to get it. Typically, a policy will protect a portion of your income if you’re not able to work – usually for up to 12 months.
Should you consider PPI for a car loan?
Whether or not you might benefit from a payment protection insurance policy is completely down to your personal financial circumstances. If you’re unlikely to be able to continue paying your car finance if you’re out of work – it might be worth exploring in a little more detail.
That said, you might find you have insurance that already covers you – if you pay into a critical illness insurance policy for example.
If you feel like PPI insurance might be ideal for you, it’s best to get advice from an insurance company who is authorised by the Financial Conduct Authority to give advice about insurance products. You may also wish to seek this advice from an accredited independent financial advisor.