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.
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 unemployment, sickness, disability, injury or pay the outstanding loan balance upon death.
If you are unsure if you have been charged for a Junk insurance policy, Claimo can help request your paperwork for free.
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.
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.
(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 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.