Q I am about to take out an £8,000 unsecured personal loan with Halifax to consolidate a credit card debt. The bank had offered me its Silver payment protection policy, but when I read the small print it became clear that as a supply teacher I wouldn't qualify for unemployment cover as I am deemed a seasonal worker and cannot expect to be working or to get paid during school holidays. They modified the offer to the Bronze cover for death and illness (but not unemployment), and said they would reduce my monthly payments by £1.11. The illness cover excludes anything to do with HIV or the usual stuff about pre-existing conditions, but also says any kind of stress-related condition or mental or nervous disorder is excluded. Should I buy it?
MT
A Payment protection insurance (PPI) is generally a waste of time and money. We say so and so does Which?.
But it makes a fortune for banks including Halifax, whose in-house insurance company, St Andrews, makes big profits and pays even more in commission to those who sell its policies, even if these are other parts of the same banking empire.
The reduction from silver to bronze has saved you very little, and you should also ask why the seller did not ascertain that you could not have made a claim - why was it left to you to read through the small print?
Over the five year life of the loan the £25 a month you will be charged for PPI adds up to £1,500. That's an awful lot to pay for something that will probably not happen, and if it does, is probably quite limited in what it will pay and for how long.
You would do much better putting that £25 away in a savings account (you can get really good interest rates on regular amounts) and calling on it if need be. And please don't forget that stress - common with teachers - is excluded from the policy.
