With loss of income now the main reason why people sign up to debt management plans, Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses (http://www.burgesses.com) is urging borrowers to consider PPI when taking out a mortgage, loan or credit card.
According to debt management provider, Euro Debt, 'loss of income' is the top response when it comes to explaining why a plan is needed and for the first time, pushes 'spiralling multiple debts' into second place.
Some 4000 respondents were questioned over a six month period (December 08 to May 09) and over one in four - 28.5% - cited redundancy as the key driver behind their indebtedness. A figure which Sara-Ann says could be much lower if PPI was purchased.
She questions: "For a low outlay, people can buy a policy that will meet their monthly financial commitments should they lose their job and avoid the need to set up debt management plans, so why do so few opt to purchase this type of cover? There's a huge amount of job uncertainty out there and yet people ignore something that provides financial certainty for up to a year."
Issues surrounding PPI mis-selling and recent news of premium hikes and cover restrictions appear to be putting people off purchasing policies, but Sara-Ann is quick to point out that not all providers are adopting the same tactics and where properly sold, low-cost PPI can be a financial lifeline.
She counters: "Over half the mis-selling complaints to the Financial Ombudsman Service are as a result of the actions of the UK's six largest financial services groups. However, where PPI is purchased separately to the mortgage, loan or credit card provision, you will find a completely different story. I know of standalone firms such as British Insurance who have never received a complaint about their claims, price or service delivery, reiterating my point that good quality cover at affordable premiums is available to all."
The TUC this week warned that unemployment will carry on rising for some time after the UK economy picks up and predicts jobless figures will increase until the autumn next year. There are also predictions that the Office of National Statistics will today announce unemployment figures of over three million.
"With such compelling statistics," continues Sara-Ann, "I urge anyone taking out a loan or with credit card commitments to put in a place a mechanism to ensure their monthly payments can still be made in the event of redundancy. This is not scare-mongering - it's encouraging people to act prudently and fend off financial adversity."
Whilst the Bank of England confirms mortgage approvals rose in May to 43,200 - an increase of 57% on November's figure of 27,500, money charity Credit Action says that during the three months to the end of March this year, 3,178 people reported they had become redundant every day.
Sara-Ann concludes: "On the one hand mortgage lenders are congratulating themselves for increasing the amount of credit they're extending, and on the other, we're seeing more and more people losing the financial capacity to repay their debts. PPI can stem that tide of indebtedness and I sincerely hope borrowers siphon off a small amount of their monthly income to pay into a policy - then they will lose that loss of income worry."
British Insurance (http://www.britishinsurance.com) charges ?3.40 per ?100 of benefit for unemployment cover, meaning that a person spending ?17 a month would, in the event of redundancy, receive ?500 a month for up to a year.
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