Payment Protection Insurance (PPI) is often sold alongside credit agreements and though it is meant to protect a borrower against the risk of being unable to make repayments in the event of unexpected circumstances such as an accident, sickness or unemployment, it frequently fails to do so.

If you've taken out a mortgage, a loan for a kitchen or a car, applied for a credit card or consolidated your debts, payment protection insurance will almost certainly have come into the equation. Of course, PPI can be a lifesaver for some people but government figures suggest they represent a tiny minority. Statistics reveal only 4% of people ever claim on their PPI policies and that one in four of these claimants is refused. Small print exclusions and administrative nightmares are usually to blame.

Payment protection insurance can also be staggeringly expensive. The Citizens Advice Bureau reports that PPI premiums can add between 13% and 56% to the price of a loan. Payments can also carry high interest charges when lenders add insurance charges to the loan total.

Even more worrying, you might have payment protection insurance without even knowing about it. Some unscrupulous salespeople automatically include payment protection insurance in the quotes they give for monthly loan repayments.

How much is PPI costing you?