It is often offered alongside a personal loan, credit card or mortgage or secured loan and many lenders make it sound compulsory, but it is purely optional. However, sometimes a lender may only approve you for a preferential interest rate if you take out their PPI.

Be careful as some lenders may simply add the extra insurance to cover the additional borrowing without telling you. You need to ask if PPI will be added.

The practice of insisting that a borrower take out the lender's PPI in order to qualify for a better interest rate is regarded as among the most unscrupulous of tactics. Always ask to see the monthly repayment and total repayable minus the PPI, this way you can work out how much extra the PPI will cost you. It is wrong for loan and credit card providers to include it in your quote without telling you. You can refuse to accept it.

Yes if it covered most eventualities. The problem is that many bank and credit card providers that sold the insurance policies failed to point out the potential pitfalls.

These policies will often not cover the whole debt and will only payout for a limited period only.

They are often confusing and full of exclusions in the small print therefore making it hard for someone to claim, e.g. those that have a fixed term of contract or are self employed and only pay in restrictive circumstances.

Not necessarily. Most of the policies that lenders offer you are probably no good but if you are concerned about keeping up your payments and wish to have some form of protection then you can purchase what is often referred to as a 'stand alone policy' so that you have cover should you need to make a claim.

Well what do you expect if the policies are cheap, you get what you pay for don't you?

These are definitely not cheap. The insurance premium usually needs to be paid up front; sometimes this can amount to several thousands of pounds. Because of this many potential policy holders would not see this as attractive so to get round this the banks and credit card providers have simply just added it to the cost of the loan or credit card.

Afraid so,

Should all this have been explained to me when I was sold this insurance?

Yes. Banks and credit card providers have a duty to draw to your attention the 'key' points of your policy, this should include the upfront premiums on which the interest is charged, cancellation charges and that it may not cover you if you are self employed or on contract work. To mention it in passing in the small print is not acceptable.

Because most banks and credit card providers earn small margins as it is a highly competitive market they recoup this loss by selling the PPI which not only earns them money but also pays hefty commissions to the agents and staff, this then fuels the mis-selling.

It is estimated that of the 7 million individuals per year who purchase PPI only 4 percent make a claim and a quarter of these are rejected.

The Office of fair Trading, OFT, estimates that the actual claims paid out is 20 percent of the total premiums collected, this is compared to 54 percent of motor insurance, so you can see this is a massive earner for the banks and credit card providers.

This will depend on your individual circumstances, i.e. how much savings you have or what other provisions you may have made. You may also have sufficient cover from your employer so check this out first. If you reside with someone and both are at work then the risk is also reduced.

Anyone who has PPI on a personal loan, mortgage or credit card and believes these points were not fully explained has a good case for getting these premiums refunded.

Furthermore if when you were sold the policy and you were on a fixed term of employment contract or were self employed then the policy will probably not pay out if you need to claim therefore it is useless and you will need to claim back the premiums paid to date.

Click on our Letter 2 (bottom of this page) it is a word document and highlights all the points for you to consider to help you decide if you have been mis-sold the product.

This depends on the type of the insurance and the loan you have. Most of the policies arrange for the PPI to be paid on a monthly basis so you are able to cancel the payment at any time, you will need to check this with your provider. However some policies have a 12 month contract or for the term of the loan which will make it difficult to cancel the payments.

In some cases whereby the loan is paid off early you may not be able to claim back your premiums. The reason being that if you agreed to a loan amount upfront, with the insurance costs included then you may be asked to repay the full amount.

Write to your bank or credit card provider and send it by recorded delivery. You can print off proof of postage on the Royal Mail Website, just enter your 13 digit reference number similar to e.g.: AA 0001 0001 9GB

And request the total cost of your insurance and a list of the payments you have made to date. You will also need to request the 'key facts of the policy' and in particular 'the exclusions'. We have prepared two letters for you; for more info and to download them see the bottom of this page.

PPI only came under the FSA jurisdiction in January 2005; therefore any policies sold prior to this date are not covered by the Financial Services Authority, FSA, rules and regulations. This means that these cases cannot be referred to the Financial Ombudsman Service, FOS, for them to investigate your complaint if you have not settled after eight weeks.

If you have a policy prior to this date and feel you have been mis-sold then you may have to go through the Courts to seek a refund of your premiums.