Income Protection Risks from Claims Chasing Companies
The differences between income protection and payment protection insurance appear to be causing confusion amongst consumers and claims chasers. The ongoing furore surrounding the mis-selling of payment protection insurance (PPI) is causing much confusion amongst consumers, financial advisers and claims chasing companies, who are finding it to difficult to differentiate between PPI and income protection (IP) products.
The manifestation of this confusion is causing problems for income protection providers, who are increasingly being contacted by claims chasers with wrongful PPI claims. This increase in invalid claims to IP providers and the ombudsman is causing clients to cancel perfectly legitimate and valuable IP contracts.
Payment protection insurance provides cover for payments relating to loans and mortgages. Despite being much maligned, PPI is still a worthwhile product for many individuals; to such an extent that the Mortgage Code Compliance Board and the FSA require mortgage advisers to record the reasons why cover was not put in place for new borrowers.
With finances increasingly stretched and disposable income falling, many people would rather spend their money on day to day living costs, rather than protecting their loan or mortgage repayments; however, the desire to protect their lifestyle remains.
The importance of affordability is and has always been paramount. Many advisers are increasingly turning to income protection insurance to achieve this, as it protects applicants who rely on their monthly income to meet mortgage payments, rather than simply providing a lump sum like a critical illness policy.
With income protection advisers and providers responsible for ensuring their clients receive the protection they need, the fallout of the PPI scandal and the insatiability of claims companies has left many people without the protection they need. In the short term they may receive a small lump sum, but without income protection insurance, in the long term their home and lifestyle may be at risk.