Is Waiver of Payment another form of PPI?

22 June 2012

Q

I had an adaptable endowment policy, which has now matured. When I went through the paperwork recently I found that a substantial charge had been made for 'Waiver of Payment'.This was designed to pay the premiums if I could not work. Is this classed as payment protection insurance and if so, could I have been mis-sold it?
From
IP, Leeds

A

I’m afraid Waiver of Payment is very different to PPI. Waiver of Payment (or Waiver of Premium) benefit means that you don’t have to pay premiums on your policy if you are unable to work due to long-term illness or incapacity, after a typical waiting period of three or six months.

Its purpose is to ensure that the policy can be maintained at a time when finances are becoming tight due to long-term loss or reduction in income.

The big difference between PPI and Waiver is that the former is an individual contract that is often sold with a loan, while the latter is a feature of a policy, such as your endowment. Waiver is often an optional feature but it actually works differently from PPI in many ways.

For example, PPI is typically a maximum 12-month benefit, but Waiver benefit lasts for the period of incapacity and so could provide cover for the remaining term of your policy. A key selling feature of PPI is redundancy cover (which some policyholders are ineligible for), but Waiver does not include this.

Furthermore, PPI provides automatic acceptance to every applicant, but the plans have many exclusions which have often only been understood at point of claim. Waiver benefit is underwritten at application stage based upon personal medical and occupational facts, and so a declined claim is far less likely.