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Your Complete Guide to Junk Insurance & How to Get a Junk Insurance Refund with Claimo.
CCI, GAP Insurance, Mechanical Breakdown Insurance
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.
Junk insurance refers to insurance policies that provide little or no real coverage for policyholders, but are sold to consumers with the promise of providing protection for their assets. These policies are often sold alongside other financial products, such as credit cards or loans, and are often marketed as “add-ons” or “extras” that will provide additional protection for the consumer.
In Australia, junk insurance policies have been an issue for many years, with some of the most common types of junk insurance being sold as add-ons to credit cards, loans, and other financial products. These policies typically provide very limited coverage and are often sold to consumers who may not understand the terms and conditions of the policy, or who may not be aware of the limitations of the coverage they are purchasing.
One of the main issues with junk insurance in Australia is that it is often sold by banks and other financial institutions, who are able to use their market power to push these policies on consumers. This has led to many consumers being sold policies that they do not need or cannot use, and that do not provide the level of protection that they were led to believe they were purchasing.Another issue with junk insurance in Australia is that it is often sold as an add-on to other financial products, such as credit cards or loans, which means that consumers may not even be aware that they are purchasing insurance. This can lead to confusion and misunderstanding, and can make it difficult for consumers to make informed decisions about whether or not to purchase a policy.The Australian government has taken steps to address the issue of junk insurance, with the Australian Securities and Investments Commission (ASIC) issuing a report in 2013 that found that many consumers were being sold policies that were of poor value, and that did not provide the level of coverage that they were led to believe they were purchasing. The report also found that many consumers were not aware that they were purchasing insurance, and that they were not being provided with clear information about the terms and conditions of the policy.
In response to the report, the Australian government introduced new regulations that are designed to improve the transparency and fairness of the sale of add-on insurance products. These regulations require financial institutions to provide clear information about the terms and conditions of the policy, and to ensure that consumers are not sold policies that they do not need or cannot use.
Despite these regulations, however, junk insurance remains an issue in Australia, with many consumers still being sold policies that do not provide the level of protection that they were led to believe they were purchasing. It is important for consumers to be aware of the potential risks associated with junk insurance, and to make sure that they understand the terms and conditions of any policy that they are considering purchasing.
In conclusion, junk insurance is a type of insurance policy that provides little or no real coverage for policyholders, but is sold to consumers with the promise of providing protection for their assets. These policies are often sold alongside other financial products, such as credit cards or loans, and are often marketed as “add-ons” or “extras” that will provide additional protection for the consumer. The Australian government has introduced new regulations to improve the transparency and fairness of the sale of add-on insurance products. But the issue still persists, and consumers should be aware of the potential risks associated with junk insurance and make sure that they understand the terms and conditions of any policy they are considering purchasing.
Claimo offers a service to help check your documents or request relevant paperwork for free.
Common examples of Junk insurance added to loans are:
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.
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.
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’
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.
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.
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.
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 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.
(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.”
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)
LFI (insurer for Liberty Finance)
MTA Insurance (owned by Suncorp)
National Warranty Company
NM Insurance (underwrites motorcycle insurance for The Holland Insurance Company, AAI (part of Suncorp) and AIG Australia)
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).
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.
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!
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!
Claimo offers a service to help check your documents or request relevant paperwork. If insurance is located we submit a refund request on a no win no fee basis on eligible claims.
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