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What is Junk Insurance?

Your Guide to Junk Insurance & How to Get a Refund with Claimo.

In 2018, The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry revealed that Australia’s big four banks have been ripping off customers by selling unnecessary and worthless insurance products attached to loans and credit cards.

These products are often referred to as “junk insurance”.

If you have purchased a car on finance or taken out a credit card or loan, you may have paid junk insurance that is essentially useless to you. Motor vehicle dealers, finance companies, and banks often added insurance or warranties onto loans costing you thousands of dollars.

Often, you pay premiums for cover you do not understand, nor need. Worse still, you might be sold the cover without even knowing you bought it.

Claimo has successfully helped over 1600 Australians seek refunds from banks. Securing back more than $5 million in junk insurance refunds. 

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    These are some of the issues we see:

    • It might be useless to you. For example, unemployment cover in a CCI policy will likely not pay out if you are unemployed or working casually.
    • Premiums are expensive. Expect to pay over $2000 for CCI. You are likely paying interest as well when the policy is financed into the loan.
    • Payments might not cover the full amount of debt. For example, if you become unemployed or disabled, the CCI may only cover your repayments for a limited period.
    • A crafty sales process. A salesperson will sometimes add CCI onto a loan or credit card without explaining what the CCI is, or without you knowing.

    Common examples of Junk insurance added to loans are:

    How consumer credit insurance (CCI) works

    Consumer credit insurance (CCI) provides cover for consumers if they are unable to meet their minimum loan repayments due to involuntary unemployment, sickness, disability, injury or pay the outstanding loan balance upon death.

    Consumer credit insurance is the most common form of junk insurance. This is because it can be found on your credit cards, personal loans, car loans, mortgages or novated leases. ASIC reports that millions of policies have been sold to Australian’s. In many cases, you may not even know that you have been charged for consumer credit insurance. 

     If you are unsure if you have been charged for a Junk insurance policy, Claimo can help request your paperwork for free.

    To read more about this type of CCI insurance, read on here. 

    How Guaranteed Asset Protection works (GAP) works

    Also known as shortfall insurance, Guaranteed Asset Protection (GAP) is designed to cover the difference between the insurance pay-out if your car is written off and the balance still owed on your car’s financing plan in the event of a total loss. 

    For example:

    You get a loan to buy a second-hand car or motorbike for $15,000. Once you include the interest, fees and charges on the loan, the total you must repay on the loan is $25,000. You buy comprehensive car insurance on the car. You are involved in an accident and your car is written off. Your comprehensive car insurance will pay you $12,000 for the vehicle, but you are still left with $13,000 to repay off your loan. This $13,000 is the ‘gap’ or ‘shortfall’

    How Mechanical Breakdown Insurance (MBI) works

    Mechanical Breakdown Insurance (or extended warranty) provides additional cover on top of the manufacturer’s or statutory warranty. It generally covers original components and fittings at the time of purchase against mechanical failures or defects.

    Mechanical breakdown insurance cover does not start until the new car warranty expires. So, if you bought a new car and it comes with a three-year new car warranty, you would be paying for a policy that you will not be able to claim on for at least three years.

    Australian Consumer Law gives you automatic consumer guarantees regardless of any other warranty the dealer sells or gives you. It is important to ensure that an extended warranty policy provides greater benefits than what you automatically receive under the consumer guarantees.

    To read more about the MBI Insurance refund, click here. 

    How Tyre and Rim Insurance works

    Tyre and Rim Insurance can cover your car or motorcycle for damage to your tyres and rims. The cover normally includes blowouts, punctures, and damage from different road hazards like driving through a pothole.

    Most car insurance policies will exclude cover for tyre damage caused by things like punctures, cuts, or bursts. So, if you get a puncture, cut, or burst tyre you can claim the repair costs back through your tyre and rim policy.

    How Mortgage Protection Insurance works

    Mortgage protection insurance is a type of term life insurance that is intended to pay off your mortgage in case of death, disability, involuntary unemployment or accident and illnesses. To put it simply, you buy a policy for a set period of time, make monthly payments, and if worst comes to worst while the policy is active, your designated beneficiary receives funds to pay off your mortgage. This coverage is designed to ensure that your family can stay in their home if you are unable to make mortgage payments.

    Mortgage Protection Insurance often falls into the category of ‘junk insurance’. This is because the claims ratios on home loan insurance is often very low. This means that the insurer may not make out your claim. This is particularly stressful if you are experiencing a tough time or the unimaginable has happened.

    If you have been sold mortgage protection insurance, you may be eligible for a junk insurance refund.

    Add-on Insurance Class Actions

    After investigations into the sale of consumer credit insurance, GAP insurance, extended warranty and tyre and rim insurance, the Banking Royal Commission and the finance regulator, ASIC, found that consumers were often sold policies that provided them with little value.

    It also found that financial institution had been using pressure tactics or unfair sales tactics to get consumers to buy add-on insurance policies. 

    The investigations still haven’t finished, and we are seeing many of the major banks like CBA, NAB, Westpac and ANZ getting fined for the way in which they sold junk insurance to their customers.

    Law firms have also launched class actions against some of the big banks in relation to the sale of junk insurance. 

    A class action is type of legal proceeding in which a person (the applicant or plaintiff) brings a claim on behalf of a wider group of people against a respondent. 

    Based on previous class actions for junk insurance, members received significantly less than they were charged. It was found that on average, consumers were received 0.9 cents in ever dollar paid in premiums. That means that if you paid $1,000 in premiums, you would likely receive around $90 in compensation from the class action for add-on insurance. 

    Consumers may be able to receive a better class action refund by opting out of the class action and using Claimo instead or pursuing the refund themselves through the firms dispute resolution channel.

    Current Class Actions

    – Allianz Class Action

    ANZ Class Action

    – Westpac Class Action

    CBA Class Action

    Past Class Actions (which you may still be able to obtain a refund from, contact us today)

    – Swann Insurance Class Action

    – NAB Class Action

     You can read more about the current class actions here

     

    CASE STUDY: Misleading & Deceptive Sales Conduct

    (Renee, 24, Melbourne)

    “I purchased a vehicle from a dealership in May 2017. When I saw the car I purchased, it was advertised at $15,000 ‘drive away’ which I thought was a good deal. However, upon leaving the dealership that evening I had been signed up for $18,716.80 worth of credit on my loan paperwork – which was a lot more than I had budgeted for. The salesman was very quick talking and deflective of questioning, this should have been a warning sign to me but as a first-time car buyer I did not realise what I had walked into.

    The salesman told me that in order for me to get finance I had to get finance protection insurance and warranty protection insurance because any lender wouldn’t loan me money without it as that’s how they ‘protect their investment’.

    He presented me with so much paperwork on the day. I have counted at least 31 different pages completely full of information. On the day, each time I began to read a section, he would begin talking and asking questions that required me to stop reading, and then prompt me to sign a section I hadn’t completely read whilst talking about how he was about to be finished for the day.

    It felt like the only option was to sign.”

    junk insurance refund policy

    Have you Ever Had a Policy with Any of These Insurers?

    Claimo helps Australians check their paper for FREE. We look into your policies to see if you’ve unintentionally paid for junk insurance with one fo these providers. 

    • Eric Insurance (formerly AVEA Insurance)

    • Allianz Insurance
    • LFI (insurer for Liberty Finance)

    • Sovereign Insurance

    • Virginia Surety

    • QBE Insurance

    • MTA Insurance (owned by Suncorp)

    • Swann Insurance

    • National Warranty Company

    • NM Insurance (underwrites motorcycle insurance for The Holland Insurance Company, AAI (part of Suncorp) and AIG Australia)

    • Aioi Nissay Dowa Insurance Company Australia (sells Toyota Insurance)

    As Featured on 9NEWS

    Claimo and our happy applicants were recently featured on 9NEWS. Our article exposed how the big banks were ripping off hard working Australian consumers. One of our successful applicants Susan Peterson, a business support officer from Queensland, has just got back almost $43,000 for unnecessary insurance on a car loan, credit card and her mortgage. See the full story below (compliments of 9NEWS). 

    Play Video

    No Win No Fee

    Claimo can help you a get a refund of the costs + interest charges on a No Win, No Fee basis for your junk insurance claim. We charge 20% (plus GST) and take out all the hassle from the paperwork and dealing with the insurance companies on your behalf. To read even further about obtaining a refund, see here. 

    Why use Claimo to get my junk insurance refund?

    We know that it can be intimidating and time consuming making a claim against your financial firm and we take the stress out of the process. Claimo are experts in add-on insurance and know all the reasons why you should get your money back for junk insurance. You do not need to worry about dealing with the finance company. Claimo will manage the whole process for you and give you regular updates. Our team are friendly and based in Melbourne, Australia. We’re real people!

     

    We know that it can be intimidating and time consuming making a claim against your financial firm and we take the stress out of the process. Claimo are experts in add-on insurance and know all the reasons why you should get your money back for junk insurance. You do not need to worry about dealing with the finance company. Claimo will manage the whole process for you and give you regular updates. Our team are friendly and based in Melbourne, Australia. We’re real people!

     

    How does Claimo get my junk insurance refunded?

    The first stage of the process would be to check your loan or credit card documentation. Don’t worry if you no longer have your documents, Claimo will request these for you!

    We will send an information request to your banks and financial institutions to see if you have been charged for add-on or junk insurance.
     
    If you have been charged for junk insurance, one of Claimo’s claims specialists will give you a call to discuss your eligibility. When financial firms confirm that you have not been charged for the insurance, we will close that part of your enquiry. We don’t charge if you do not have insurance.
     
    Claimo will then submit a claim on your behalf and manage the process for you from start to finish. On average, the claims process can take around 12 weeks once your claim has been submitted.
     
    Our junk insurance claims managers will give you regular updates as they come. 
    DISCLAIMER: This article does not provide legal or financial advice. Any information in this article is designed to provide information to consumers who want to learn more about class actions. All information is general in nature. Claimo is not liable for any loss caused, whether due to negligence or otherwise arising from use of, or reliance on, the information provided directly or indirectly, by use of this service.  Consider whether the service is right for you. If you are unsure, seek independent legal advice.