Payment Protection Insurance, or PPI, is a type of insurance policy that covers a currently outstanding debt. Other terms for this policy are credit protection insurance, or loan repayment insurance. While payment protection insurance may seem similar to income protection insurance, the two policies are not the same.

Who Sells PPI?
PPI is usually sold, or offered, by credit providers and banks. These companies offer the PPI as a form of an overdraft, or a loan. Sometimes a PPI is offered as an “add-on” to an overdraft product or a loan.

Coverage of PPI
Payment protection insurance protects the policyholder against sickness, an accident, unemployment, and even death. Any situation that might prevent a policyholder from earning an income to pay off his debt is covered by the PPI. The policy normally covers basic loan payments for a specified period, for instance, 12 months. After this period has passed, the debtor (or policyholder) will have to find other ways to pay off the debt. Payment protection insurance is different from other insurance types because it can be a little difficult to ascertain if the policy will be right for the person. This type of policy needs careful assessment, by both the policyholder and the credit company.

Controversy Arising from PPI
One controversy related to this kind of policy is the relatively high number of claims that have been rejected, as compared to other types of insurance. One main reason for this is that the PPI was underwritten when the product or service was still at its selling stage. Customers who took a PPI without careful assessment become frustrated later on when they file a claim for coverage under their payment protection insurance and they are rejected because the claim is not eligible for coverage