PPI Explained: What Was Payment Protection Insurance and Were You Mis-Sold It?
Published 12th of September 2013·Updated 23 April 2026
Reviewed by: Reviewed for accuracy April 2026
Payment protection insurance (PPI) was a type of insurance sold alongside credit cards, personal loans, mortgages and store cards. It was designed to cover your monthly repayments if you lost your job, fell ill or became seriously injured. Banks mis-sold it on a massive scale, and over £38 billion in compensation was paid out to UK consumers before the claims deadline closed in August 2019.
Short Summary
PPI was designed to protect borrowers by covering their monthly debt repayments during periods of illness, unemployment or serious injury. In principle, it was a reasonable product.
The scandal arose because millions of customers were sold PPI without proper explanation of the terms, or had it added to their accounts without being asked. Many were sold policies they could never claim on.
The FCA imposed a claims deadline of 29 August 2019. New complaints are no longer accepted, but unresolved complaints submitted before the deadline can still be pursued through the Financial Ombudsman Service.
Claims management companies charge up to 24 per cent plus VAT of any payout. You can complain directly to the Financial Ombudsman for free.
What did PPI actually cover?
PPI covered your minimum monthly repayments on a credit product if specific events prevented you from working. The events typically covered included redundancy, serious illness and accident or disability leaving you unable to work.
When a successful claim was paid out, the money went directly to your lender, not to you. Most policies covered repayments for a fixed period, commonly 12 months, after which you would need to resume payments yourself. Not all hardship situations were covered, and the exclusion clauses were extensive.
What was not covered by PPI?
PPI policies were often narrow in scope. Common exclusions included:
| Exclusion | Why it mattered |
|---|---|
| Pre-existing medical conditions | Many customers with long-term conditions were sold PPI knowing they could never claim |
| Self-employment | Most policies only covered employees made redundant, not the self-employed |
| Voluntary redundancy | Choosing to leave a job was not covered |
| Short-term contracts | Some policies excluded workers on contracts below a minimum term |
| Retirement | Claims could not be made after pension age in many policies |
These exclusions were often buried in the small print. Lenders frequently failed to explain them at the point of sale.
Why did PPI get such a bad reputation?
PPI became controversial because of how it was sold, not what it covered in theory. Banks including Barclays, Lloyds, HSBC, NatWest and Halifax added PPI to loans and credit cards without customers' explicit agreement. Others sold policies to customers who were clearly ineligible, such as those who were already retired or self-employed.
According to the FCA, more than 64 million PPI policies were sold in the UK between roughly 1990 and 2010. Banks earned significant profits from the product because PPI premiums were high relative to the cover provided. The Competition Commission and the FCA investigated the industry extensively, and regulators ultimately ordered lenders to contact all affected customers and repay premiums plus statutory interest.
How was PPI mis-selling defined?
Mis-selling occurred in several ways. The most common were:
- Adding PPI to an account without the customer's knowledge or consent
- Not making clear that PPI was optional
- Selling PPI to a customer who was ineligible to claim under its terms
- Failing to explain the cost or the key exclusions
- Applying pressure on customers to take out PPI as a condition of getting the loan
The Financial Ombudsman Service upheld millions of complaints on these grounds. If your PPI complaint was submitted before 29 August 2019 and was rejected without clear justification, you can still refer it to the Ombudsman.
Could PPI ever be a good product?
For some borrowers, PPI provided genuine peace of mind. If you were employed, had no pre-existing conditions that the policy excluded, and understood what you were buying, PPI could protect you from falling into arrears during a period of illness or redundancy.
The issue was never the product itself but the widespread failure to explain it honestly and to sell it only to people for whom it was appropriate. Following the investigation, new rules from the FCA required that PPI be sold separately from the credit product, with a mandatory 7-day pause before purchase.
What happened to PPI compensation claims?
The FCA set a final complaints deadline of 29 August 2019. Before that date, banks wrote to affected customers, and many made successful claims. The total compensation paid exceeded £38 billion, making it the largest consumer redress exercise in UK financial history.
If you received a payout but believe it was calculated incorrectly, or if you submitted a claim before the deadline that remains unresolved, you can contact the Financial Ombudsman Service on 0800 023 4567 at no cost.
Frequently Asked Questions
What was PPI in simple terms?
PPI was an insurance product sold alongside loans and credit cards. It was meant to cover your monthly repayments if you lost your job, fell seriously ill or were injured. It was widely mis-sold, and the UK's biggest banks paid over £38 billion in compensation to affected customers.
Could I have been mis-sold PPI without knowing?
Yes. Many customers had PPI added to their accounts without being told, or were not informed that it was optional. You may have been paying PPI premiums for years without realising it. Check old credit card or loan statements for any reference to "PPI", "payment cover" or "loan protection."
Is the PPI deadline still in effect?
Yes. The FCA's deadline for new PPI complaints was 29 August 2019. You cannot start a new claim after this date. However, complaints submitted before the deadline that were rejected can still be taken to the Financial Ombudsman Service.
How was PPI added to a credit card?
In many cases, bank staff added PPI to credit card agreements as a standard part of the application process, without clearly explaining that it was a separate, optional product with its own cost. Some customers only discovered they had PPI when they reviewed their statements.
Did all banks mis-sell PPI?
Most major UK lenders were found to have mis-sold PPI to some degree. Barclays, Lloyds Banking Group, HSBC, NatWest, Santander and Halifax all paid significant compensation. The Lloyds Banking Group alone paid out over £20 billion in PPI redress, according to company financial reports.
What is the difference between PPI and income protection insurance?
PPI was tied to a specific debt and paid out directly to the lender. Income protection insurance is a standalone policy that pays you a proportion of your salary for an extended period if you cannot work. Income protection is generally considered a more comprehensive and transparent product.