Critical illness and PPI too difficult to understand

Thursday, February 2, 2012

A lot of us tend to struggle to get our heads around financial products, but recent research from the ABI has shown that some of the most difficult to understand are critical illness and PPI.

The survey has shown that out of a score of ten, more than half of all respondents have rated their understanding off PPI at just five or below and 36% also rated their understanding of critical illness cover at five ore below. Mortgage payment protection insurance (MPPI) and pensions were also not very well understood.

In comparison, the most understood products were savings and current accounts, with 67% of people rating them at seven out of ten or above. Loans took second place, with 62% of people scoring them at seven out of ten or above.
Respondents were also asked how they felt they could compare the various features of each product, with the intention of ultimately buying the product.

Again, PPI, as well as MPPI and critical illness cover, came bottom in terms of product comparisons, with pensions and annuities also receiving lower ratings.

MPPI and PPI are two forms of income payment protection insurance. PPI policies can cover credit card and loan repayments for the next 12 months, if you are not able to make them due to an illness or accident or because you may have been made redundant. MPPI can cover your mortgage for the same period and the same reasons.

At the same time, CI cover will pay out a tax-free lump sum if you were to be diagnosed with a seriously life threatening illness. It usually covers roughly 35 different illnesses. The money can then be used to pay off your mortgage and other bills.