Payment protection insurance, or PPI, is insurance that will pay out a sum of money to help you cover your monthly repayments on mortgages, loans, credit/store cards or catalogue payments if you are unable to work, or become unemployed through no fault of your own.

With single premiums, you pay the full cost of the insurance up-front. This premium is usually added to the total value of the loan with interest charged on top.

To find out more, see Payment protection insurance.

Some policies state that you will not be able to claim any refund of your premium outside the statutory cancellation period of 14 or 30 days.

If you repay your loan early, the PPI is of no further value to you because the PPI benefits are linked to it. So a firm should not prevent you from receiving a partial refund from the PPI policy if you cancel the policy or repay the loan early. However, you may not be entitled to a refund if you cancel very close to the end of the period covered or if you have already made a successful claim under the policy.

We obtained agreements from firms to change their contracts and practices so that consumers would receive refunds when repaying their loans early. The details of these agreements are listed at the bottom of this page.

We then discussed our concerns about terms which prevent consumers from receiving a refund if they cancel the policy for any reason with the industry trade bodies, which included the Association of British Insurers (ABI) for the insurance industry and the British Bankers' Association (BBA) for the banking industry.

They agreed that firms should also allow you to receive a refund if you cancel your policy without repaying the loan but that you may not be entitled to a refund if you cancel very close to the end of the period covered or if you have already made a successful claim under policy.

We expect all firms to take notice of these agreements.

Firms should allow you to receive a refund if you cancel your policy when you repay the loan, except if you cancel very close to the end of the period covered by your policy or if you have already made a successful claim under the policy.

If you have a contract with a firm that prevents you from claiming a partial refund of your PPI premium if you settle your loan early, ask the firm if they will give you a partial refund anyway. If they do not, and you believe you are entitled to one, complain to the firm and tell them about our work. You can also report the term to us – see Unfair contract terms.

The trade bodies have agreed that firms should also allow you receive a refund if you cancel your policy without repaying the loan, except if you cancel very close to the end of the period covered or if you have already made a successful claim under the policy.

If you have a contract with a firm that prevents you from claiming a refund of your PPI premium if you want to cancel the insurance, again, ask the firm if they will give you a partial refund. If they do not, and you believe you are entitled to one, complain to the firm and tell them about our work. You can also report the term to us – see Unfair contract terms.

Firms that have terms that prevent you from receiving any refund of your premium if you cancel the policy should be writing to their customers to tell them how refunds will now be dealt with in practice. If you receive a letter like this from your firm, read it carefully and contact them if you have any questions about it.

There is not a 'one-size fits all' rule for calculating refunds, due to the many different types of firms and commercial practices in the PPI industry.

We take the view that refunds should be based on firms' reasonably incurred costs. These costs might include administrative fees, a proportion of commission and the fact that the risk at the beginning of the policy is higher than at the end of the policy, so more premium is used early on. This means that the refund you get may not be in proportion to the remaining policy length.

Firms should soon be including examples or a table to show how refunds will be calculated in new policies. This will help to improve the transparency of refunds.

The firms listed below have been fully co-operative in changing their contracts and practices for customers receiving refunds when repaying their loans early.