If you have ever taken out a credit card loan or purchased a car, you have probably been sold junk insurance that is practically useless to you. Motor vehicle dealers, insurance companies, and banks often add insurance or warranties without you even realising what they are for or if you can benefit from them. By reading this text, you will learn what junk insurance is and how you can seek a refund on it.
Junk insurance is a widespread problem
“Junk insurance” is a general term for a range of insurance policies that big banks and insurance companies sell to their customers, that are often proven unnecessary. The companies end up ripping off their customers since they are often unable to claim these policies. In 2018, The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry exposed the scandal. They pointed out that banks and insurance companies needed to refund perhaps billions of dollars in “Junk Insurance” premiums, that they’ve wrongly sold over the years. The problem is, many people still do not realise that they are eligible for a refund.
You cannot benefit from it
The Banking Royal Commission has found that customers have little to no benefit from these insurance policies, after conducting research. Less than 10 cents are paid out in claims for every dollar in premiums. It was also proven that banks and insurance companies usually used pressure tactics or unfair sales tactics to get consumers to buy add-on insurance policies. Moreover, the “mis-selling” of insurance included selling students and pensioners income-protection insurance, from which they clearly cannot claim. Also, people often felt like they had no choice but to pay for the add-ons, not even realising that they are optional. Many customers were even unaware that they were paying for them in the first place.
It is easy to get a refund
If you are wondering how to refund junk insurance, you are not alone. Thankfully, nowadays there are many options by which you can claim your refund. Australians have claimed back more than half a billion in refunds through class actions, or with the help of private firms directed exclusively at demanding your refund back. You can get thousands of dollars in refunds; on policies, you were not even aware are junk insurance. There are also publicly funded legal centres, to help people recoup CCI insurance premiums. But what types of insurance policies are considered junk?
There are various types you may be unaware of
There are different kinds of junk insurance policies, and you probably do not realise that you are paying for them monthly:
Consumer Credit Insurance (also known as CCI)
Insurance companies give out Consumer credit insurance (CCI) policies as cover for consumers if they are unable to meet the minimum monthly loan repayment, in case of sickness or injury, injury, unemployment, disability, or to pay the outstanding loan balance in case of death. This is the most common type of junk insurance and it is optional. It is usually sold to you when you apply for credit cards, personal loans, car loans, mortgages, or notated leases, often without you realising that you are being additionally charged for it. The problem is, you are usually ineligible to claim it and unlikely to benefit from it.
Guaranteed Asset Protection
GAP insurance is designed to cover the gap between what your comprehensive insurance policy will pay once your car is written-off, and what you still owe on your car’s financing plan. This often happens in case of accidents. Your loan is much bigger than the sum your insurance is willing to cover, so you are still left with a large sum you have to repay your loan. This is where the GAP or “shortfall” insurance should step in.
Extended Warranty Insurance
The Mechanical breakdown Insurance is supposed to cover your vehicle on top of your manufacturer’s warranty. The insurance provider agrees to pay for repair or replacing parts or components in case of breakdowns or mechanical failures. The problem with extended warranty coverage is that it usually cannot be applied to second-hand vehicles because it has so many exclusions. Moreover, if you have a three-year warranty on your car from the manufacturer, you would be paying for a policy you would not be able to claim for three years. Australia’s Consumer Law contains automatic consumer guarantees regardless of any other warranty the dealer sells or gives you, and therefore buying extended warranties is not necessary, unless it provides greater benefits than under the consumer guarantees.
Mortgage Protection Insurance
Included in your life insurance, Mortgage Protection Insurance is intended to pay off your mortgage in case of death, disability, involuntary unemployment, or accident and illnesses. That is, of course, if the policy is still active and you make monthly payments when worst comes too worst. However, the claim ratios are very low, and the insurer may not make out your claim.
By now, almost half a billion dollars have been reclaimed by wronged customers. If you suspect that you may have been paying for junk insurance, do not hesitate to seek legal advice. You can only benefit by requesting a refund on what was wrongfully taken from you.