Money Insider: Good value on offer but PPI ghosts persist

It's no surprise that consumers remain sceptical when buying insurance protection these days, not helped by the fact that the long-running payment protection insurance (PPI) scandal is rarely out of the news.

The sorry saga has cast a long shadow over the insurance industry resulting in a lack of trust in new-style income-protection products. As a consequence, people who could safeguard their financial future with this valuable back up won't even give it a second glance.

Although billions of pounds of compensation has been paid out by the banks, the image of protection cover in its various guises remains in shreds.

There are signs that the UK economy may be slowly on the mend, but it's still a long way from full health, and further painful and unavoidable government spending cuts are still in the pipeline. People need to consider how this could impact their employment situation, and in such times of economic uncertainty, may later regret tarring all insurance plans with the dirty PPI brush.

The new breed of short-term, income-protection policies and lifestyle-protector products are virtually unrecognisable from the much maligned old-style cover. With PPI you had to pay the full premium up front, it was added to your loan and you were charged interest on top. If you repaid your loan or cancelled your policy early, you lost out financially as the refund wasn't made on a pro-rata basis.

The new lifestyle-protector products, on the other hand, offer far more flexibility and choice for someone looking to protect their family finances including the ability to tailor the cover so you only pay for what you need.

You can choose to protect a set monthly amount, (not just loan or mortgage commitments), in most cases up to a maximum of 60 per cent of your gross monthly income.

You select whether you require protection against sickness, unemployment or both, and you also can choose how long you want to wait before the policy pays out, and the longer you choose to wait the cheaper the cover becomes.

Premiums are payable monthly, but unlike PPI of old you are able to cancel at any time without incurring any financial penalty.

However, insurance providers have a real battle on their hands trying to win over the protection doubters as the PPI name continues to be dragged through the mud. There are competitive products available from many big-name players, including Aviva, LV=, Nationwide Building Society, Paymentcare and Legal & General among others. However, the easiest option is to try a couple of price-comparison sites and let them do the searching and legwork for you.

It's worth spending 10 minutes of your time to obtain a quote from one of the aggregator sites. With so many variables the price of cover can vary enormously, so it's difficult to give you a broad brush idea of what the monthly premium will be.But once you've got your own personal illustration, at least you are in a position to decide if this is something you'd like to consider further.

The PPI scandal and actions of the claims vultures may have left a bad taste, but it's important people understand the new-style cover is not more of the same. Rather, it's something that will protect their family without costing the earth.

Take a couple of minutes and ask yourself, "If I was unable to work for the next six months, could I continue to support my family and pay the household bills?" If the answer is no, then income protection could prove to be a financial lifesaver and warrants a closer look.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk