There is now an alternative to the credit card providers' insurance policies that pay off card debt if you have an accident, become ill or unemployed, in the form of a stand-alone policy.
The new payment protection insurance (PPI) policy from Paymentcare, underwritten by Isle of Man-based insurer, Templeton Insurance, is claimed to be cheaper than those PPI policies sold by the likes of Virgin, Morgan Stanley, MBNA and other card providers to cover debts on their cards.
However, Paymentcare's policy differs in more man price - so much so that other providers claim that like is not being compared with like. Morgan Stanley stated that "paymentcare acts more as income disruption insurance and charges a fee even when the consumer is not borrowing on their credit card".
With Paymentcare's policy, credit card holders pay a premium of £650 (a month, including Insurance Premium Tax) per £100 of benefit to be received, while under the other policies, you pay a premium based on the outstanding unpaid balance. With this policy, "the policyholder selects the level of cover that is closest to their average monthly outstanding balance", explains Paymentcare managing director Shane Craig, and this can be between £1,000 and £5,000.
If a claim is accepted, the policy pays 10% a month of the balance you selected for the first five months and 50% in month six, thereby paying off the entire amount You still continue to pay the premium while claiming the benefit, but the premium is reimbursed to you via a waiver of premium clause in the policy. The waiting period before an accident or sickness claim can be paid is 14 days, whereas with most of the other PPI policies this is 30 days.
Unlike the major card providers' PPI, the payments made by Paymentcare can be used to pay off the balances on a number of cards you may hold and not just one. Also, with the other PPI policies, the payments are made into your card account, while with Paymentcare the payments are made direct to the claimant.
In comparison, with the Morgan Stanley PPI policy, underwritten by Norwich Union, you pay 76 pence per £100 outstanding balance, so the monthly premium varies according to the size of the outstanding balance. With this policy, payments for accepted claims are 3% of the outstanding balance on the card at the start of the claim, up to £1,000 a month. This continues for a maximum of 12 monthly payments for involuntary unemployment, or until the outstanding debt has been paid in the case of sickness or accident
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