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Consumer credit insurance

Think twice before you buy consumer credit insurance

Page reading time: 3 minutes

When you apply for a personal loan, mortgage or credit card, you may be offered consumer credit insurance. It offers poor value for money and you don't have to buy it.

How consumer credit insurance works

Consumer credit insurance (CCI) can provide some cover if:

Salespeople get a commission if you buy CCI. They may try to pressure you by offering CCI when you're trying to get credit or a loan. You do not have to buy it.

From 5 October 2021, salespeople can tell you about CCI when you apply for credit or a loan. But they must wait until four days after your credit or loan is approved before selling it to you. This gives you time to consider if you need it.

If they don't wait before selling it to you, you have the right to cancel the insurance and get a full refund.

CCI usually covers repayments you can't make because of illness, death, disability or involuntary unemployment. If you have CCI and lose income due to any of these, you should make a claim.

Contact your lender or financial service provider if you're experiencing financial hardship.

Consumer credit insurance is poor value

A high number of CCI claims are denied or withdrawn. An ASIC review of CCI showed that:

CCI payouts could be less than you expect. Your payout will be the amount you owe at the time of the insured event. This could be less than what you owe when you lodge the claim or it's approved.

CCI doesn't cover all the debt you owe. For example, policies that are sold with a credit card usually only pay out a percentage of the outstanding debt.

CCI may be extra insurance you don't need

You may already be covered if you have other insurance. For example:

Questions to ask before buying CCI

Make a claim on consumer credit insurance

Submit a claim as soon as possible

It's important to lodge a claim as soon as possible after the insured event. If you wait, there may be a gap between what your policy pays and the debt you owe.

Visit the National Debt Helpline website for steps to take to claim on consumer credit insurance.

Tell your insurer if you're in financial difficulty

If you urgently need payment, you can ask your insurer to:

Ask your lender about a hardship variation. Ask them to postpone recovery action while they process your consumer credit insurance claim.

Complain about consumer credit insurance

Contact the provider's internal dispute resolution department if:

If you can't reach an agreement, contact the Australian Financial Complaints Authority (AFCA) to make a complaint and get free, independent dispute resolution.

For tips on making a complaint, see how to complain.