PPI ‘can be valuable when borrowing’

Payment protection insurance (PPI) can be a valuable financial tool, despite the recent mis-selling scandal.

This is according to Annie Shaw, founder of personal finance advice website CashQuestions.com, who said PPI is potentially useful for people taking out unsecured loans.

She explained that this form of insurance is designed to "protect consumers from getting behind with loan repayments if they get sick or become unemployed".

However, Ms Shaw also described the glut of mis-selling cases as "a huge blot on the financial services industry" and urged people to make sure they choose a product that suits their needs.

Consumers received payouts worth a total of £441 million over mis-sold PPI claims in December 2011, according to the Financial Services Authority.

In total, compensation worth £1.9 billion was handed to customers last year.

Despite these figures, Which? pointed out that only a quarter of the amount set aside for claims by lenders has been paid out so far.

By Joe White