Payment protection insurance, also known as PPI, Credit Protection Insurance or Loan Repayment Insurance, is an insurance product designed to cover an outstanding debt should you be unable to make the repayments, either through unemployment, accident, illness or even death.

PPI is most often sold by banks and loan companies when you take out a loan or mortgage or by other credit agencies when you make a purchase.

PPI typically covers the minimum monthly loan repayment for a fixed period of time, usually 12 months, after which the borrower has to take responsibility for the repayments his or herself - regardless of whether or not their situation has improved.

The problem with payment protection insurance is that it is very difficult to determine at the point of sale whether or not it is the right insurance for you. If, for example, you think you'd have no problem making repayments if you had no income, then it is definitely not for you and is a cost you don't need.

If you're worried about your job security then it could be perfect for you, but even this becomes complicated as the manner in which you're made redundant could render the claim invalid.

Only 4% of people who take out PPI ever claim on it and 25% of those claims end up being rejected.

There has been a lot of controversy surrounding PPI as it is claimed that it has often been mis-sold or worse, sold without the borrower's knowledge. It is estimated that 70% of the adult population in the UK have been mis-sold payment protection insurance.

This is because PPI is often sold at the same time as a person takes out a loan, some other form of credit or takes out a mortgage and is often 'wrapped up' in the overall fees discussed. A significant number of people aren't even aware they've bought it.

The Competition Commission announced in May 2010 that PPI could not be sold at the same time as personal loans, mortgages or credit cards. Banks and lenders must now wait a minimum of seven days before contacting the borrower to offer it to them.

And the PPI industry is bracing itself for around £2 BILLION worth of PPI claims as new rules from the FSA come into force. Anyone who feels they were mis-sold payment protection insurance can make a claim and win back some, if not all, the money they spent.

There are already hundreds of companies in the UK offering to assess and carry out claims on behalf of those who feel they were mis-sold a policy and they will likely do a good job for a fee, usually around 25% of the final payout.

It is possible to make the PPI claim yourself, however. Either way, if you have a policy running now or were sold one in the last six years you have a very good chance of claiming but you will need the original paperwork.

Start by complaining to the bank or credit provider who sold you the plan - not the insurance company - and if they reject your complaint, take it to the Financial Ombudsman Service who will advise you further.