PPI 'a Safe Pair of Hands' During Recession, Says Burgess

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Last week's unemployment and mortgage arrears figures, coupled with the recognition that the UK is officially in recession, should prompt people who cannot pay bills if they lose their job, to consider Payment Protection Insurance says PPI lobbyist Sara-Ann Burgess from Burgesses.

Sara-Ann Burgess, MD Burgesses

Given the gloomy predictions, everyone should be assessing their finances and ensuring they have the means to continue paying bills should they become one of the million or so unemployment statistics.

Last week's unemployment and mortgage arrears figures, coupled with the recognition that the UK is officially in recession, should prompt people who cannot pay bills if they lose their job, to consider Payment Protection Insurance says PPI lobbyist Sara-Ann Burgess from Burgesses.

According to the Office of National Statistics, unemployment topped 1.92 million between September and November last year and mortgage lending data released by the Financial Services Authority shows there were 340,000 homeowners in mortgage arrears at the end of Q3.
Two consecutive periods of falling economic growth - and the biggest quarter on quarter decline since 1980 - has resulted in the worst recession for a generation.

Sara-Ann comments: "Although these figures are likely to have little impact on those still in a job and able to pay their mortgages and other bills, it does indicate that the recession is deepening, no one is immune from its impact and people must ensure they have a financial safety net in place to protect them from spiraling debts."

Whilst the jobless total is at its highest since September 1997, it doesn't take into account the thousands of redundancies announced from November onwards. The British Chamber of Commerce predicts this figure will rise to 3.1million over the next two years.

Equally, it's been suggested the number of people in mortgage arrears is the 'tip of the iceberg'. Already the figure is 24% higher than 2007 and analysts suggest there will be 200,000 repossessions over the next five years. Shelter says 900,000 homeowners are struggling or falling behind each month with their mortgage payments.

Sara-Ann's concern is that there are measures people can take to help cushion the financial fall-out from redundancy, but few are choosing to protect themselves: "We know very few people are managing to save in this current climate - moneyexpert.com says a third of adults would face financial disaster within two months if they lost their jobs, and half of these would only last a month - so why aren't more buying Payment Protection Insurance?"

PPI pays out a pre-agreed sum every month for up to a year to meet a wide range of financial commitments, should the policyholder lose their income due to unemployment, an accident or sickness. Premiums are calculated per £100 of benefit and policies can either meet mortgages, loans and credit cards or provide a replacement income to cover wider bills such as utilities, food and transport.

An increasing number of financial services providers have been fined by the Financial Services Authority for mis-selling PPI and Sara-Ann suspects the failure to purchase cover is because people do not trust High Street lenders and are unwilling to pay their premiums. Research undertaken by the Competition Commission and consumer champion Which? reveal providers who offer credit alongside PPI, often pressurise customers into buying cover they often do not need and will not be able to claim on.

She continues: "There are independent, more-ethical providers, who offer affordable, low-cost cover that will make a substantial difference to your household finances should you lose your job. Their premiums have been found to be 10 times cheaper for loan protection, four times for mortgage and five times for income."

Standalone firm, British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment, and £1.90 for accident and sickness. A person protecting against redundancy and looking to receive £500 a month to meet mortgage repayments would pay £17 a month.

Sara-Ann concludes: "People want to know they're in 'safe hands' when it comes to taking out a policy and that their claim will be paid if they lose their job. Firms such as British Insurance should have their confidence. It's won more awards than any other PPI provider for its policies and the way in which it treats customers fairly, has a 100% customer retention rate, has never received a product or service complaint, has policies for homeowners, those renting and people in shared ownership schemes and offers a back to work assistance programme.

"Given the gloomy predictions, everyone should be assessing their finances and ensuring they have the means to continue paying bills should they become one of the million or so unemployment statistics."

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